My View On Sugar Sector

We have been maintaining our bullish view on the Sugar sector since Nov.08, mainly on the expectations of lower production in the country. When the Govt. has been estimating country’s production at 22 million tonnes (mt) for season 08-09, in Nov. 08, we expected it to be 18.5mt. On collecting details of production on all India basis, upto 15-3-09, it is estimated at 13.1 mt. Season 08-09(expiring in Sept 09) is not likely to see a production of more than 15mt.

The reason for lower production is low yield per hectare of sugarcane crop, lower sugar recovery by the mills, farmers migrating to other crops like wheat, rice and potato and lesser number of running of mills across the country due to lower availability of sugarcane, even after paying higher rate above SAP in U.P.

If we consider opening stock of 8mt and an expected import of 2mt of raw sugar with estimated domestic production of 15mt, we will be having 25mt against our annual domestic consumption of 23mt. Therefore, as at 30-9-09, we will be left with a closing stock of just 2 mt which would be very alarming.

Though the Govt. is contemplating allowing import of white sugar at 0 duty against present rate of duty at 60%, but the same is not feasible and workable. Taking a price of $395 per tonne and a freight of $35 per tonne and adding a cost of Rs. 1,000 per tonne as port handling, insurance and transport the landed cost of white sugar works out at Rs. 23 per kg. against ex-mill price of Rs. 20 per kg. in Maharashtra and Rs. 21 per kg. in U.P.

Even import of raw is now not feasible unless the importer is confident of realising above Rs.23 per kg. Due to the lower raw price in Dec. 08, importers have contracted to import about 9 lakh tonnes of raw sugar. These include 5.25 lt by Shree Renuka Sugars, 90,000 tonnes by NCS Sugars, 50,000 tonnes by Dalmia Sugars, 40,000 tonnes each by Simbhaoli, Dharani and Rana Sugars, 25,000 tonnes each by Dhampur Sugar and the EID Parry-Cargill refinery at Kakinada, and 22,000 tonnes by the KK Birla Group. Since February 20, not a single new contract has been entered into.

Realizing this shortage and hoping that this does not spoil the mood of the voters due to an expected steep rise in the price of sugar (as sugar , onion and potato are very sensitive items during elections, making Govt. to loose it) the Govt is making all the efforts to keep retail price within Rs. 25 per kg. till elections get over. This price control is achieved with free market release mechanism, releasing buffer stock created by the Govt. last year, inventory limits having imposed on the traders and by asking mills to go slow on price hike for a month or so.

Once the last phase of election gets over by 13^th May it is certain that ex-mill price of sugar will rise to about Rs. 24 per kg. in next couple of months. This in turn will see a retail price of Rs. 28 per kg. Hence, mills carrying stock will reap windfall gain on its inventory. Also, Tamil Nadu mills will be at an advantage as they will continue to produce with estimated number of crushing of about 220 days. Those mills also have the benefits of lower cane price and higher realisation of Molasses.

Hence, sugar companies with higher inventory held by them will be making good profits which would get reflected in its share price from mid May. It is expected that all the sugar stocks would be able to rise by about 50% from its current levels in the next 5-6 months.

My View On Gontermann Peipers India Ltd

About The Company

Gontermann Peipers India Ltd (GIP) was promoted in technical and financial collaboration with Gontermann-Peipers GmbH, Germany, a front-ranker in the manufacture of Rolls – casting and forging rolls. In 1981 the company was taken over by the Ispat Group. The promoters and their various companies hold 55.13% of the equity.

About The Results

The financial performance of the company had not been too encouraging for the second quarter and as predicted, it got only worse for the third quarter ended 31^st Dec 2008. YoY, sales dipped 27%. When the beginning was bad, the ending had to suffer. It ended the quarter with a net loss of Rs.1.08 crore. OPM more than halved from 23% in Q3FY08 to around 7% in Q3FY09.

Apart from the slowdown, what really made matters worse was the minor fire that occurred in the Melting & Foundry Division of the factory on November 28, 2008 and it reopened on 1^st Dec 2008. Operations were partially affected and though the company has adequate insurance cover, the loss on account of production was higher.

About The Stock

I would not recommend to go for this stock at present or early coming times.

Disclaimer : I do not have any personal holding in this stock.

My View On Mutual Funds : Part VI

What are the rights that are available to a Mutual Fund holder?

As per SEBI Regulations on Mutual Funds, an investor is entitled to
1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks from the date your request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme;
3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as are essential in order to keep them informed about any information which may have an adverse bearing on their investments.
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with the concerned Mutual Funds and follow up with them till they are resolved.

It is very often said that Mutual Funds have performed badly. Please explain?

The performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net Asset Value (NAV). However a fund's performance should be evaluated on the basis of a comparison with the relevant indices and alternative instruments. The NAV varies from fund to fund. Therefore this argument is not entirely true. However some funds have performed poorly with their NAV quoting well below their original IPO price.

Can I purchase after the time which is displayed beside the scheme?

In order to get the NAV of the same day, you can purchase up to the cut-off time of the scheme, after which you will get the next day's NAV. (If the next day is a holiday, then the NAV of the next working day

Will TDS be deducted on the redemption of units? If yes what will be the basis of deduction of TDS

TDS is not deducted on the sale proceeds for Resident Indians.
In case of NRI's, TDS will be deducted on the sale proceeds. The TDS will deducted depending upon whether it is a short-term capital gain or long term capital gains. For short term capital gain the tax is deducted @ 33% while in case of long term capital gains it is deducted @ 11%

What is Entry Load on Mutual Fund Applications?

On every purchase of mutual fund units, the Asset Management Company (AMC) charges an entry load from the customer.

The entry load is reduced from the total amount paid and units for the remaining amount are allotted to the investors.

For example:
If Investment is Rs 100
And Entry Load is 2%
Net Amount for investment will be Rs. 98. (100- 2% of 100)
If current NAV is Rupees 10
Units allotted will be 9.8 (98/10)

All About Mutual Funds : Part V

What is Shut-Out Period?

After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a right to declare Shut-Out period not exceeding 5 days at the end of each month/quarter/half-year, as the case may be, for the investors opting for payment of dividend under the respective Dividends Plans. The declaration of the Shut-Out period is envisaged to facilitate the AMC/the Registrar to determine the Units of the unitholders eligible for receipt of dividend under the various Dividend Options. Further, the Shut-Out period will also help in expeditious processing and despatch of dividend warrants. During the Shut-Out period investors may make purchases into the Scheme but the Purchase Price for subscription of units will be calculated using the NAV as at the end of the first Business Day in the following month/quarter/half-year as the case may be, depending on the Dividend Plan chosen by the investor. Therefore, if investments are made during the Shut -Out period, Units to the credit of the Unitholder's account will be created only on the first Business Day of the following month/ quarter/half year, as the case may be, depending on the dividend plan chosen by the investor. The Shut-Out period applies to new investors in the Scheme as well as to Unitholders making additional purchases of Units into an existing folio. The Trustee reserves the right to change the Shut-Out period and prescribe new Shut- Out period, from time to time.

Who runs a reliable Mutual Fund ?

Unit Trust of India was the first mutual fund which began operations in 1964. Other issuers of Mutual funds are Public sector banks like SBI, Canara Bank, Bank of India, Institutions like IDBI, ICICI, GIC, LIC, Foreign Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like Kothari Pioneer, DSP Merrill Lynch, Sundaram, Kotak Mahindra, Cholamandalam etc

What are the factors that influence the performance of Mutual Funds?

The performances of Mutual funds are influenced by the performance of the stock market as well as the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies as well as the economy as a whole. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy.

As a new investor how do I select a particular scheme?

Choice of any scheme would depend to a large extent on the investor preferences. For an investor willing to undertake risks, equity funds would be the most suitable as they offer the maximum returns. Debt funds are suited for those investors who prefer regular income and safety. Gilt funds are best suited for the medium to long-term investors who are averse to risk. Balanced funds are ideal for medium- to long-term investors willing to take moderate risks. Liquid funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. Tax Saving Funds are ideal for those investors who want to avail tax benefits.
An important aspect while selecting a particular scheme is the duration of the investment. Depending on your time horizon you can select a particular scheme. Besides all this, factors like promoter's image, objective of the fund and returns given by the funds on different schemes should also be taken into account while selecting a particular scheme.

All About Mutual Funds : Part -IV

What is Entry/Exit Load ?

A Load is a charge, which the AMC may collect on entry and/or exit from a fund. A load is levied to cover the up-front cost incurred by the AMC for selling the fund. It also covers one time processing costs. Some funds do not charge any entry or exit load. These funds are referred to as 'No Load Fund'. Funds usually charge an entry load ranging between 1.00% and 2.00%. Exit loads vary between 0.25% and 2.00%.

For eg. Let us assume an investor invests Rs. 10,000/- and the current NAV is Rs.13/-. If the entry load levied is 1.00%, the price at which the investor invests is Rs.13.13 per unit. The investor receives 10000/13.13 = 761.6146 units. (Note that units are allotted to an investor based on the amount invested and not on the basis of no. of units purchased).

Let us now assume that the same investor decides to redeem his 761.6146 units. Let us also assume that the NAV is Rs 15/- and the exit load is 0.50%. Therefore the redemption price per unit works out to Rs. 14.925. The investor therefore receives 761.6146 x 14.925 = Rs.11367.10

What Is Sale / Purchase price?

Sales/Purchase price is the price paid to purchase a unit of the fund. If the fund has no entry load, then the sales price is the same as the NAV. If the fund levies an entry load, then the sales price would be higher than the NAV to the extent of the entry load levied.

What is redemption price?

Redemption price is the price received on selling units of open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.

What is Repurchase Price?

Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load.

What is a Switch?

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, risk profiles or changing circumstances during their lifetime.

All About Mutual Fund : Part III

What are the different plans that Mutual Funds offer

Growth Plan and Dividend Plan A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realises capital appreciation on the investment. This plan appeals to investors in the high income bracket. Under the dividend plan, income is distributed from time to time. This plan is ideal to those investors requiring regular income. Dividend Reinvestment Plan Dividend plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors. Automatic Investment Plan Under the Automatic Investment Plan (AIP) also called Systematic Investment Plan (SIP), the investor is given the option for investing in a specified frequency of months in a specified scheme of the Mutual Fund for a constant sum of investment. AIP allows the investors to plan their savings through a structured regular monthly savings program. Automatic Withdrawal Plan Under the Automatic Withdrawal Plan (AWP) also called Systematic Withdrawal Plan (SWP), a facility is provided to the investor to withdraw a pre-determined amount from his fund at a pre-determined interval. What are the different types of Mutual funds? (a) On the basis of Objective Equity Funds/ Growth Funds Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds. Diversified funds These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector. Sector funds These funds invest primarily in equity shares of companies in a particular business sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector. Index funds These funds invest in the same pattern as popular market indices like S&P 500 and BSE Index. The value of the index fund varies in proportion to the benchmark index. Tax Saving Funds These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions. Debt / Income Funds These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor. Liquid Funds / Money Market Funds These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. Gilt Funds These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They are best suited for the medium to long-term investors who are averse to risk. Balanced Funds These funds invest both in equity shares and fixed-income-bearing instruments (debt) in some proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks. Hedge Funds These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio. (b) On the basis of Flexibility Open-ended Funds These funds do not have a fixed date of redemption. Generally they are open for subscription and redemption throughout the year. Their prices are linked to the daily net asset value (NAV). From the investors' perspective, they are much more liquid than closed-ended funds. Investors are permitted to join or withdraw from the fund after an initial lock-in period. Close-ended Funds These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter closed for entry as well as exit. These funds have a fixed date of redemption. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but the discount narrows as maturity nears. These funds are open for subscription only once and can be redeemed only on the fixed date of redemption. The units of these funds are listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit from the fund at any time through the secondary market. Interval funds These funds combine the features of both open-ended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity. (c) On the basis of geographic location Domestic funds These funds mobilise the savings of nationals within the country. Offshore Funds These funds facilitate cross border fund flow. They invest in securities of foreign companies. They attract foreign capital for investment. Is there is any tax applicable on the redemption of mutual funds? Yes. The tax applicable is called as STT i.e. Security transaction tax which is 0.25%. STT is applicable only in case of redemption of equity linked schemes.

All About Mutual Fund : Part II

What are the benefits of investing in Mutual Funds?

1. Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument a professional analytical approach is required in addition to access to research and information and time and methodology to make sound investment decisions and keep monitoring them.

2. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide the small investors with an opportunity to invest in a larger basket of securities.

3. The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc.

4. It is possible to invest in small amounts as and when the investor has surplus funds to invest.

5. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds.

6. In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks/bonds.

Are there any risks involved in investing in Mutual Funds?

Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the government may come up with new regulation which may affect a particular industry or class of industries. All these factors influence the performance of Mutual Funds.

All About Mutual Funds : Part - I

What is a Mutual Fund?

A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business who collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities.

What is an Asset Management Company?

An Asset Management Company (AMC) is a highly regulated organisation that pools money from investors and invests the same in a portfolio. They charge a small management fee, which is normally 1.5 per cent of the total funds managed.

What is NAV?

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows:

NAV= Market value of the fund's investments+Receivables+Accrued Income- Liabilities-Accrued Expenses
_______________________________________________________________________________
Number of Outstanding units

How often is the NAV declared?

The NAV of a scheme has to be declared at least once a week. However many Mutual Fund declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. However, NAV of a close-ended scheme targeted to a specific segment or any monthly income scheme (which are not mandatorily required to be listed on a stock exchange) may be published at monthly or quarterly intervals.

Fundamental Anlysis of Stocks

Fundamental Analysis

Fundamental Analysis is a conservative and non-speculative approach based on the "Fundamentals". A fundamentalist is not swept by what is happening in Dalal street as he looks at a three dimensional analysis.

The Economy

The Industry

The Company

All the above three dimensions will have to be weighed together and not in exclusion of each other. In this section we would give you a brief glimpse of each of these factors for an easy digestion

The Economy Analysis

In the table below are some economic indicators and their possible impact on the stock market are given in a nut shell.

	Economic indicators	Impact on the stock market
1.	GNP -Growth -Decline	-Favourable -Unfavourable
2.	Price Conditions - Stable - Inflation	-Favourable -Unfavourable
3.	Economy - Boom - Recession	-Favourable -Unfavourable
4.	Housing Construction Activity - Increase in activity - Decrease in Activity	-Favourable -Unfavourable
5.	Employment - Increase - Decrease	-Favourable -Unfavourable
6.	Accumulation of Inventories	- Favourable under inflation - Unfavourable under deflation
7.	Personal Disposable Income - Increase - Decrease	-Favourable -Unfavourable
8.	Personal Savings	- Favourable under inflation - Unfavourable under deflation
9.	Interest Rates - low - high	-Favourable -Unfavourable
10.	Balance of trade - Positive - Negative	-Favourable -Unfavourable
11.	Strength of the Rupee in Forex market - Strong - Weak	-Favourable -Unfavourable
12.	Corporate Taxation (Direct & Indirect - Low - High	-Favourable -Unfavourable

The Industry Analysis

Every industry has to go through a life cycle with four distinct phases
i) Pioneering Stage
ii) Expansion (growth) Stage
iii) Stagnation (mature) Stage
iv) Decline Stage

These phases are dynamic for each industry. You as an investor is advised to invest in an industry that is either in a pioneering stage or in its expansion (growth) stage. Its advisable to quickly get out of industries which are in the stagnation stage prior to its lapse into the decline stage. The particular phase or stage of an industry can be determined in terms of sales, profitability and their growth rates amongst other factors.

The Company Analysis

There may be situations were the industry is very attractive but a few companies within it might not be doing all that well; similarly there may be one or two companies which may be doing exceedingly well while the rest of the companies in the industry might be in doldrums. You as an investor will have to consider both the financial and non-financial aspects so as to form a qualitative impression about a company. Some of the factors are

History of the company and line of business
Product portfolio's strength
Market Share
Top Management
Intrinsic Values like Patents and trademarks held
Foreign Collaboration, its need and availability for future
Quality of competition in the market, present and future
Future business plans and projects
Tags - Like Blue Chips, Market Cap - low, medium and big caps
Level of trading of the company's listed scripts
EPS, its growth and rating vis-à-vis other companies in the industry.
P/E ratio
Growth in sales, dividend and bottom line

GOLDEN RULES FOR EQUITY INVESTMENT

Some of the most important points to be kept in mind before making any investment in equities.

1. Not being disciplined and failing to cut losses at 8% below the purchase price A strategy of selling while losses are small is a lot like buying an insurance policy. You may feel foolish selling a stock for a loss -- and downright embarrassed if it recovers. But you're protecting yourself from devastating losses. Once you've sold, your capital is safe.The 7%-8% sell rule is a maximum, not an average. Time your buys right, and if the market goes against you the average loss might be limited to only 3% or 4%.

Again its to be kept in mind, do not to sell a winning stock just because it pulls back a little bit.

2. Do not purchase low-priced, low quality stocks.

3. One should follow a system or set of rules.

4. Do not let emotions or ego get in the way of a sound investing strategy You may feel foolish buying a stock at 60, selling at 55, only to buy it back at 65. Put that aside. You might have been too early before, but if the time is right now, don't hesitate. Getting shaken out of a stock should have no bearing on whether you buy it at a later date. It's a new decision every time

5. Invest in equities for long term and not short term

6. Do not make unplanned investing and starting without setting clear investment objectives and time frame for achieving the same.

7. Not having an eye on what the big players / mutual funds buy & sell is a pitfall and an opportunity lost to pick the right stocks. It takes big money to move markets, and institutional investors have the cash. But how do you find out where the smart money is going? Make sure the stock you have your eye on is owned by at least one top-rated fund. If the stock has passed muster with leading portfolio managers and analysts, it's a good confirmation its business is in order. Plus, mutual funds pack plenty of buying power, which will drive the stock higher

8. Patience is a virtue in investing. Do not panic on your existing stocks. It's so important, we repeat: Be patient for your stocks to reap rewards.

9. Do not be unaware of what is happening around in the market. As always, knowledge is power and in investing, it's also a comfort. Dig for more information other than just the top stories that are flashed.

10. Do not put all your money on the same horse. Diversify your portfolio ideally into five industries and ten stocks.

11. Margin is not a luxury, it is a deep-seated risk, know your risk profile and use margin trading sparingly. You as an investor might lose control of your investments if you borrow too much.

12. Greed is dangerous; it may wipe out the gains already made. Once a reasonable profit is made the investor should get out of the market quickly.

CHOOSING A MUTUAL FUND

Past performance

While past performance is not an indicator of the future it does throw some light on the investment philosophies of the fund, how it has performed in the past and the kind of returns it is offering to the investor over a period of time. Also check out the two-year and one-year returns for consistency. How did these funds perform in the bull and bear markets of the immediate past? Tracking the performance in the bear market is particularly important because the true test of a portfolio is often revealed in how little it falls in a bad market.

Know your fund manager

The success of a fund to a great extent depends on the fund manager. The same fund managers manage most successful funds. Ask before investing, has the fund manager or strategy changed recently? For instance, the portfolio manager who generated the fund’s successful performance may no longer be managing the fund.

Does it suit your risk profile?

Certain sector-specific schemes come with a high-risk high-return tag. Such plans are suspect to crashes in case the industry loses the marketmen’s fancy. If the investor is totally risk averse he can opt for pure debt schemes with little or no risk. Most prefer the balanced schemes which invest in the equity and debt markets. Growth and pure equity plans give greater returns than pure debt plans but their risk is higher.

Read the prospectus

The prospectus says a lot about the fund. A reading of the fund’s prospectus is a must to learn about its investment strategy and the risk that it will expose you to. Funds with higher rates of return may take risks that are beyond your comfort level and are inconsistent with your financial goals. But remember that all funds carry some level of risk. Just because a fund invests in government or corporate bonds does not mean it does not have significant risk. Thinking about your long-term investment strategies and tolerance for risk can help you decide what type of fund is best suited for you.

How will the fund affect the diversification of your portfolio?

When choosing a mutual fund, you should consider how your interest in that fund affects the overall diversification of your investment portfolio. Maintaining a diversified and balanced portfolio is key to maintaining an acceptable level of risk.

What it costs you?

A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time.

Finally, don’t pick a fund simply because it has shown a spurt in value in the current rally. Ferret out information of a fund for atleast three years. The one thing to remember while investing in equity funds is that it makes no sense to get in and out of a fund with each turn of the market. Like stocks, the right equity mutual fund will pay off big -- if you have the patience. Similarly, it makes little sense to hold on to a fund that lags behind the total market year after year.

TAX ASPECTS OF MUTUAL FUND

Tax Implications of Dividend Income

Equity Schemes

Equity Schemes are schemes, which have less than 50 per cent investments in Equity shares of domestic companies.

As far as Equity Schemes are concerned no Distribution Tax is payable on dividend. In the hands of the investors, dividend is tax-free.

Other Schemes

For schemes other than equity, in the hands of the investors, dividend is tax-free. However, Distribution Tax on dividend @ 12.81 per cent to be paid by Mutual Funds.

Tax Implications of Capital Gains

The difference between the sale consideration (selling price) and the cost of acquisition (purchase price) of the asset is called capital gain. If the investor sells his units and earns capital gains he is liable to pay capital gains tax.

Capital gains are of two types: Short Term and Long Term Capital Gains.

Short Term Capital Gains

The holding period of the Mutual Fund units is less than or equal to 12 months from the date of allotment of units then short term capital gains is applicable.

On Short Term capital gains no Indexation benefit is applicable.

Tax and TDS Rate (excluding surcharge)

Resident Indians and Domestic Companies

The Gain will be added to the total income of the Investor and taxed at the marginal rate of tax. No TDS.

NRIs: 30 per cent TDS from the gain.

Long Term Capital Gains

The holding period of Mutual Fund units is more than 12 months from the date of allotment of units.

On Long Term capital gains Indexation benefit is applicable.

Tax and TDS Rate (excluding surcharge)

Resident Indians and Domestic Companies

The Gain will be taxed

A) at 20 per cent with indexation benefit or

B) B) at 10 per cent without indexation benefit, whichever is lower. No TDS.

NRIs: 20 per cent TDS from the Gain

Surcharge

Resident Indians : If the Gain exceeds Rs 8.5 lakhs, surcharge is payable by investors @ 10 per cent.

Domestic Companies: Payable by the investor @ 2.5 per cent.

NRIs: If the Gain from the Fund exceeds Rs 8.5 lakhs, surcharge is deducted at source @ 2.5 per cent.

Indexation

Indexation means that the purchase price is marked up by an inflation index resulting in lower capital gains and hence lower tax.

Inflation index = Inflation index for the year of transfer / Inflation index for the year of acquisition

DIVERSIFICATION OF INVESTMENT

DIVERSIFICATION OF INVESTMENT : MEANING

Diversification is the proper allocation of fund among the various available opportunities in the market as per risk taking capacity depending on age of the investor and several other practical factors.Though some investment will carry less return but risk involvement would be negligible while in other cases return may increase with increase in risk factor.

Importance of diversification.

Diversification helps you protect your investments from market fluctuations. Diversifying means allocating your money to different investments avenues and shields you from price risks. As you pick the best stocks from the hottest sectors, the fluctuation risk of the stock eroding your investment rises correspondingly. Since some stocks in the IT and media sectors are highly volatile, you need to protect your portfolio by investing in some defensive stocks or other industry groups. It would also be wise to diversify your investments into bonds or FDs as these are low risk - fixed income avenues.

The primary objectives of any Portfolio management are

Security of principal amount invested

Stability of income

Capital growth

Liquidity – nearness to money to take up any new buy opportunities thrown open by the market

Diversification

Diversifying means buying stocks belonging to different industries with very low correlation i.e to find securities that do not have tendencies to increase or decrease in price at the same time.

What you're working towards should be at least five industries for the stock portion of the portfolio with each stock being the best stock, in your opinion, in their respective industry group. There should still be money invested in a money market fund (the equivalent of cash) as well as some in fixed income.

On the flip side, a diversified portfolio is unlikely to outperform the market by a big margin for exactly the same reason.

Portfolio – Age relationship.

Your age will help you determine what is a good mix / portfolio is

Age	Portfolio
below 30	80% in stocks or mutual funds 10% in cash 10% in fixed income
30 t0 40	70% in stocks or mutual funds 10% in cash 20% in fixed income
40 to 50	60% in stocks or mutual funds 10% in cash 30% in fixed income
50 to 60	50% in stocks or mutual funds 10% in cash 40% in fixed income
above 60	40% in stocks or mutual funds 10% in cash 50% in fixed income

These aren't hard and fast allocations, just guidelines to get you thinking about how your portfolio should look. Your risk profile will give you more equities or more fixed income depending on your aggressive or conservative bias. However, it's important to always have some equities in your portfolio (or equity funds) no matter what your age. If inflation roars back, this will be the portion of your investments that protects you from the damage, not your fixed income.

Also, the fixed income of your portfolio should be diversified. If you buy bonds and debentures directly or if you invest in FDs, then make sure you have at least five different maturities to spread out the interest rate risk.

Diversifying in equities and bonds means more than buying a number of positions. Each position needs to be scrutinized as to how it fits into the stocks or bonds that already are in your portfolio, and how they might be affected by the same event such as higher interest rates, lower fuel prices, etc. Put your portfolio together like a puzzle, adding a piece at a time, each one a little different from the other but achieving a uniform whole once the portfolio is complete.

SOME BUYING & SELLING TRICKS

HOW TO FIND A STOCK AVAILABLE AT BARGAIN PRICE?

First, look for stocks that are out of favor for a temporary reason.

Second, look for stocks within sectors that are currently out of favor.

Third, use the tight screening methods to bring stock into your “Watch List” Here are some of the parameters to use and benchmarks to begin your search:

P/E ratio: Use a minimum of 10 and a maximum of 30. With current P/E ratios closer to 30, stocks with low P/Es can sometimes signal out of favor stocks.

Price-to-Sales Ratio: Also called PSR. This is a macro way of looking at a stock. Many investors like to find stocks with a PSR below 1. It's a good number to start with, so put in .5 as a maximum and leave the minimum open. Be careful though, because many stocks will always carry a low PSR. You're looking for the stocks that have historically been high and are temporarily low.

Earnings growth: Look for atleast 20 per cent. If you can find a stock that has its earnings growing at 20% and its P/E at 10, you've got something worth investigating further. This is known as the PEG or P/E-to-Growth ratio. Sharp investors are looking for a ratio well below 1. In this example, the stock would have had a PSR of .5 (10/20).

Return on Equity: Start at 20% as the minimum and see who qualifies. The return on equity tells you how much your invested rupee is earning from the company. The higher the number, the better your investment should do.

By using just this combination of variables, you can find some interesting stocks. Try to squeeze your search each time you screen by tightening your numbers on each variable. And when you do find a stock, make sure you read all the relevant information from all the stock resources on the Web.

POINTS TO CONSIDER BEFORE MAKING A BUY? Here are some buying points for your reference 1. Strong long-term and short-term earnings growth. Look for annual earnings growth for the last three years of 25% or greater and quarterly earnings growth of at least 25% in the most recent quarter. 2. Impressive sales growth, profit margins and return on equity. The latest three-quarters of sales growth should be a minimum of 25%, return on equity at least 15%, and profit margins should be increasing. 3. New products, services or leadership. If a company has a dynamic new product or service or is capitalizing on new conditions in the economy, this can have a dramatic impact on the price of a stock. 4. Leading stock in a leading industry group. Nearly 50% of a stock's price action is a result of its industry group's performance. Focus on the top industry groups and within those groups select stocks with the best price performance. Don't buy laggards just because they look cheaper. 5. High-rated institutional sponsorship. You want at least a few of the better performing mutual funds owning the stock. They're the ones who will drive the stock up on a sustained basis. 6. New Highs. Stocks that make new highs on increased volume tend to move higher. Outstanding stocks usually form a price consolidation pattern, and then go on to make their biggest gains when their price breaks above the pattern on unusually high volume. 7. Positive market. You can buy the best stocks out there, but if the general market is weak, most likely your stocks will be weak also.

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POINTS TO CONSIDER BEFORE SELL? The decision of when and how much to buy is a relatively easy task as against when and what to sell. But then here are some pointers, which will assist you in deciding when to sell. Keep in mind that these parameters are not independent pointers but when all of them scream together then its time to step in and sell. 1. When they no longer meet the needs of the investor or when you had bought a stock expecting a specific announcement and it didn't occur. Most Pharma stocks fall into this category. Sometimes when they are on the verge of medical breakthroughs as they so claim, in reality if doesn’t materialize into real medicines; the stock will go down because every one else is selling. It's then time to sell yours too immediately, as it didn’t meet your need. 2. When the price in the market for the securities is an historical high. It's done even better than you initially imagined, went up five or ten times what you paid for it. When you get such a spectacularly performing stock, the last thing you should do is to sell all of it. Don't be afraid of making big money. While you liquidate a part of your holding in the stock to get back your principal and some neat profit, hold on to the rest to get you more money; unless there is some fundamental shift necessitating to sell your whole position. To repeat do not sell your whole position. 3. When the future expectations no longer support the price of the stock or when yields fall below the satisfactory level. You need to constantly monitor the various ratios and data points over time, not just when you buy the stock but also when you sell. When most ratios suggest the stock is getting expensive, as determined by your initial evaluation, then you need to sell the stock. But don't sell if only one of your variables is out of track. There should be a number of them screaming that the stock is fully valued. 4. When other alternatives are more attractive than the stocks held, then liquidate your position in a stock which is least performing and reinvest the same in a new buy. 5. When there is tax advantage in the sale for the investor. If you have made a capital gain somewhere, you can safely buy a stock before dividend announcements i.e. at cum-interest prices and sell it after dividend pay out at ex-interest prices, which will be way below the price at which you had bought the stock. This way the capital loss that you make out of the buy and sell can be offset against the capital gain that you had made elsewhere and will hence cut your taxes on it. 6. Sell if there has been a dramatic change in the direction of the company. Its usually a messy problem when a company successful in one business decides to enter another unrelated venture. Such a decision even though would step up the price initially due to the exuberant announcements, it would begin to fall heavily after a short span. This is because the new venture usually squeezes the successful venture of its reserves and reinvesting capability, thus hurting its future earnings capability. 7. If the earnings and if they aren't improving over two to three quarters, chuck out the stock from your portfolio. To get a higher price on a stock, it needs to constantly improve earnings, not just match past quarters. However, as an investor, you need to read the earnings announcements carefully and determine if there are one-time charges that are hurting current earnings for the benefit of future earnings. 8. Cut losses at the right level. But do not sell on panic. The usual rule for retail investor is to sell if a stock falls 8% below the purchase price. If you don't cut losses quickly, sooner or later you'll suffer some very large losses. Cutting losses at 8% will always allow investors to survive to invest another day.

Options of Investment & its return

The investment options before you are many. Pick the right investment tool based on the risk profile, circumstance, time zone available etc. If you feel market volatility is something which you can live with then buy stocks. If you do not want to risk the volatility and simply desire some income, then you should consider fixed income securities. However, remember that risk and returns are directly proportional to each other. Higher the risk, higher the returns. A brief preview of different investment options is given below:

Equities: Investment in shares of companies is investing in equities. Stocks can be bought/sold from the exchanges (secondary market) or via IPOs – Initial Public Offerings (primary market). Stocks are the best long-term investment options wherein the market volatility and the resultant risk of losses, if given enough time, is mitigated by the general upward momentum of the economy. There are two streams of revenue generation from this form of investment.

1. Dividend: Periodic payments made out of the company's profits are termed as dividends.

2. Growth: The price of a stock appreciates commensurate to the growth posted by the company resulting in capital appreciation.

On an average an investment in equities in India has a return of 25%. Good portfolio management, precise timing may ensure a return of 40% or more. Picking the right stock at the right time would guarantee that your capital gains i.e. growth in market value of your stock possessions, will rise.

Catch ICICIDirect’s ‘Tips for Stock Picks’ and ‘Portfolio Management’ Chapter II / Module 9 & 10 respectively.

Bonds: It is a fixed income(debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with fixed rate of interest on a specified date, called as the maturity date. Other fixed income instruments include bank fixed deposits, debentures, preference shares etc.

The average rate of return on bonds and securities in India has been around 10 - 12 % p.a.

Certificate of Deposits : These are short - to-medium-term interest bearing, debt instruments offered by banks. These are low-risk, low-return instruments. There is usually an early withdrawal penalty. Savings account, fixed deposits, recurring deposits etc are some of them. Average rate of return is usually between 4-8 %, depending on which instrument you park your funds in. Minimum required investment is Rs. 1,00,000.

Mutual Fund : These are open and close ended funds operated by an investment company which raises money from the public and invests in a group of assets, in accordance with a stated set of objectives. It’s a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints. Benefits include diversification and professional money management. Shares are issued and redeemed on demand, based on the fund's net asset value, which is determined at the end of each trading session. The average rate of return as a combination of all mutual funds put together is not fixed but is generally more than what earn in fixed deposits. However, each mutual fund will have its own average rate of return based on several schemes that they have floated. In the recent past, MFs have given a return of 18 – 30 %.

Cash Equivalents: These are highly liquid and safe instruments which can be easily converted into cash, treasury bills and money market funds are a couple of examples for cash equivalents.

Others : There are also other saving and investment vehicles such as gold, real estate, commodities, art and crafts, antiques, foreign currency etc. However, holding assets in foreign currency are considered more of an hedging tool (risk management) rather than an investment.

My View on Indian Indices

As per our fresh calculation , I would like to repeat myself with the same view that the market is yet to bottom out.

The market will give reaction on major market cues as Global market behavior , Economical policy , Govt Plans & policies , Company 's results , Inflation Figures , IIP No.s , GDP Figures and so on. But that would only give acceptable percentage of fall and growth. We can see relief rally in between also.

Major fall to bottom out the market and approx level for Sensex is estimated at 6000- 6500 levels would only be achieved by occurrence of any catastrophic event as serial Bombay blast of 1992 or WTC attack of 2001 , which will create sudden panic and will make a new and final bottom for the market.

At that point investor as well as traders will get an opportunity for value buying , provided they are left with some liquidity.

Summary:

1.The whole view could be summarize that we should remain on cash to have value buying at point of sudden panic and that too probably by end of March 2009.


2. If we are stuck in any stock (selected stocks only) from long time, we must exit from it immediately at present level to cower the same at lower level in panic to get benefited from the difference amount in this volatility having the same portfolio. This strategy would also be useful for those who do not have additional cash to invest during panic.


Note : NMDC is one of such stock as mentioned in point No.2


Attention Members !!!!!

For the value buying picks during panic registered member can email me to get the list of same , while unregistered member can have spot registration to avail the privilege list of value picks to make short to medium to long term gain.

Email : ommansarovar@sify.com

My View On Zee News Ltd.

About The Company

Zee News Ltd (ZNL) demerged from Zee Telefilms Ltd on March 31 2006 and became a listed entity on January 10 2007.

Zee News reaches millions of Indians thorough a clutch of news and regional entertainment channels. The specific channels operated by Zee News Ltd are Zee News, Zee Business, Zee Marathi, Zee Bangla, Zee Punjabi, Zee Gujarati, Zee Telugu, Zee Kannada and Zee 24 Taas and 24 Ghanta. Zee News Limited also supplies content to the international broadcasting business of Zee in the US, Europe, Africa, Middle East and Asia Pacific.


About The Financials

ZNL reported a topline of Rs 367.5 crore and PAT of Rs 37.1 crore for FY08. For Q1FY09, revenues (Rs 112.7 crore) grew 48% Y-o-Y on the back of 39% growth in existing channels and 165% growth in new channels. PAT for Q1FY09 stood at Rs 9.3 crore, growing 60% Y-o-Y.

About The Stock

ZNL is in dominant positions in a majority of its regional GECs. The company fares better than its key comparable channels in the broadcasting space, IBN7 and NDTV India. At the current market price of Rs 42.2, the stock is trading at 17.58x FY09E EPS of Rs 2.4 and 12.78x FY10E EPS of Rs 3.3. At the recommended price of Rs 50.7, the stock discounts the FY10E EPS by 15.36x. I would recommend the stock with a target price of Rs 50.7 over a six-month time frame.

Technical Out Look

The stock has bounced back from the level of 38.50 with high volumes indicating bullishness. This also suggests that the uptrend is building. However, during January and May 2008, prices came under pressure due to profit booking. This was in line with the market, as a whole. However, at present levels, the stock is consolidating before the up move. Among oscillators, the RSI is rising from the oversold territory and is currently at 45 showing strength. The stock has recently moved above the 20 days simple moving average, which is a bullish indication. The immediate support comes around 38.50 levels. One can expect a target around 51.45 in the coming months, which is the 50% retracement level of the recent fall from 64.5 to 38.5.

Disclaimer : I do not have any personal holding in this stock.