Business India

Indian Oil Corporation ( IOC ) to raise petrol prices in India

noreply@blogger.com (Saurabh Patil) — Mon, 25 Apr 2011 20:05:00 +0000

Indian Oil Corporation, India's largest oil firm, may increase petrol prices all throughout the country. The exact increase that can happen is not known currently. Average per liter price is Rs: 65/- in India +- Rs:4/- according to the various cities. It is estimated that IOC makes a loss of about Rs:7/- per liter currently. Add tax to it and it makes about Rs:7.50/- loss considering the current price. If the prices are increased by anything more than Rs:5/- per liter than that is going to disturb the environment nationally. Prices are regulated by the government and common public in India blames the government for any fuel price rise without knowing that global prices are actually very high than what we get in India. The government and Indian oil companies always try to keep a balance but oil companies just cannot keep making losses, some or the other time the burden has to pass to the people who are actually using the vehicles.

IOC was losing Rs 297 crore per day on selling diesel, domestic LPG and kerosene at the government controlled rates. IOC is losing about Rs:18/- per litre on diesel, Rs 28/- per litre on kerosene and whooping Rs:315/- per LPG cylinder (14.2 kg domestic cylinder). The total debt of IOC was around Rs:53,000/- crore at the end of March, 2011 and is growing at the rate of Rs:5,000/- crore per month! This cannot continue forever! Price rise is the only solution. Is there any else?

Mukesh Ambani becomes first non-American to come on board of Bank Of America

noreply@blogger.com (Saurabh Patil) — Mon, 18 Apr 2011 22:29:00 +0000

Mumbai(India): Mukesh Ambani, chairman of India' most valuable oil company Reliance Industries(RIL) and highly recognized businessman comes on the board of Bank of America - one of the oldest and largest financial institutions alive in US. Surprising it may sound, why an Oil company tycoon is been invited on board of one of the world's largest banking and financial institution, but that's the truth. Mukesh brings a lot on board. Mukesh Ambani is a multi-billionaire who is listed on Forbes billionaire list in top 10. Reliance Industries run the world's largest oil refinery at Jamnagar, Gujrat and has a total market capitalization of more than $70 billion! Reliance Industries has revenues more than $40 billion - more than what Facebook and Google have combined together (Google has about $24 billion and Facebook around $2 billion at the max.). Reliance Industries and various companies under the 'Reliance' belt Mukesh and his brother-cum-business rival Anil Ambani own have tremendous influence on various sectors of the Indian business market including oil, retail, electronics and telecommunication, finance and mutual fund industry etc. India is a thriving market and Mukesh Ambani understands India and Indian market at granular level, I'm sure Bank of America has some serious business plans in India.

Sharp employment increase in India!

noreply@blogger.com (Saurabh Patil) — Sat, 26 Dec 2009 14:40:00 +0000

The year 2009 saw loss of jobs all over US and Europe. India was not hit by the recession as hard as US but it also went through a phase of stagnation in term of employment opportunities. The new openings were very very rare throughout India in the first 3 quarters of 2009. But as the clouds of recession seem to be clearing ( or at least everyone feels that way..) Indian companies have again started hiring in bulk!

The retail industry, metals and manufacturing industry along with IT has seen a wave of new job openings in the past 2 months. The stabilizing of retail industry in US is aiding the textile industry in India to win some orders and thus is also making some significant hiring. In the previous quarter the textile sector witnessed maximum loss of jobs of about 1.52 lakh followed by IT which was around 0.38 lakh.

It is expected that India will have about 5 lakh+ job openings in the first quarter of 2010 itself. And year 2010 will be opening new jobs and added perks to the people who are already in jobs. More jobs in the economy drives everything as more jobs means more work and more work means more profitability!

Great Reading - THE INDIAN ELECTIONS!

noreply@blogger.com (Saurabh Patil) — Wed, 03 Jun 2009 03:34:00 +0000

This is what The NewYork Times is speaking about Indian elections.... it's very well said...please read.

It is truly the greatest show on Earth, an ode to a diverse and democratic ethos, where 700 million + of humanity vote, providing theirsmall part in directing their ancient civilization into the future. Itis no less impressive when done in a neighborhood which includesde-stabilizing and violent Pakistan, China, and Burma.

Its challenges are immense, more so probably than anywhere else, particularly in development and fending off terrorism -- but consideringthese challenges and its neighbors, it is even more astounding that themost diverse nation on Earth, with hundreds of languages, all religionsand cultures, is not only surviving, but thriving.

The nation where Hinduism, Buddhism, Jainism, and Sikhism were born,which is the second largest Muslim nation on Earth; where Christianity has existed for 2000 years; where the oldest Jewish synagogues andJewish communities have resided since the Romans burnt their 2nd temple;where the Dalai Lama and the Tibetan government in exile reside; wherethe Zorostrians from Persia have thrived since being thrown out of theirancient homeland; where Armenians and Syrians and many others have tocome live; where the Paris-based OECD said was the largest economy onEarth for 1500 of the last 2000 years, including the 2nd largest, only200 years ago; where 3 Muslim Presidents have been elected, where a Sikhis Prime Minister and the head of the ruling party a Catholic Italian woman, where the President is also a woman, succeeding a Muslim President who as a rocket scientist is a hero in the nation; where abooming economy is lifting 40 million out of poverty each year and isexpected to have the majority of its population in the middle classalready, equal to the entire US population, by 2025; where its optimismand vibrancy is manifested in its movies, arts, economic growth, and voting, despite all the incredible challenges and hardships; where all the great powers are vying for influence, as it itself finds its place in the world.

Where all of this is happening, is India, and as greater than 1/10th ofhumanity gets ready to vote, it is an inspiration to all the World.

- V Mitchell, New York, NY

World Bank OKs $400 mln for small firms in India!

noreply@blogger.com (Saurabh Patil) — Fri, 01 May 2009 02:47:00 +0000

WASHINGTON (Reuters) - The World Bank on Thursday approved $400 million in funding to help small and medium-sized enterprises in India cope with the global credit crisis.

The loan will be made to the Small Industries Development Bank of India (SIDBI), which will make available financing to small and medium-sized companies that are finding it hard to get access to credit. It will also go toward refinancing banks and other institutions that lend to small and medium-sized enterprises, known as SMEs.

"This project is part of a larger program of support in response to the government of India request for funding in light of the financial crisis," said Roberto Zagha, World Bank country director for India.

"It is targeted particularly at SMEs, to help address the credit slowdown that has resulted from the financial crisis," he added.

Zagha said credit growth to SMEs has fallen over the last year, which has affected overall growth and development.

RBI: Deposits in Indian banks are safe, not to worry!

noreply@blogger.com (Saurabh Patil) — Wed, 15 Oct 2008 14:31:00 +0000

The Reserve Bank of India (RBI) has assured that the deposits of the Indian common man in indian banks are safe and not to worry at all. Due to the financial crisis in US and incertainity of the global financial markets everyone in the world is fearing about their hard earned money kept in their respective country's bank. As far as India is concerned RBI governer assured that Indian banks are not hit due to the sub prime crisis in US, which is the root cause of the financial turmoil seen in the world economy. All central banks of almost all countries are taking care of the their banks- Japan & S.Korea have promised unlimited cover to their banks. Even Indian central bank RBI is injecting about Rs:60,000 crore liquidity by reducing the CRR ratio.

Yes, we are witnessing worst time in the stock market industry, but this is just the result of fear and uncertainity in the global economy. So, the conclusion is not to worry about your deposits in Indian banks and just chill! If you are an indian stock investor you may find this article (What to do in such turbulent times? ) to decide upon your strategies to face the stock market uncertainities.

Nestle to spend about Rs: 600 crore in India

noreply@blogger.com (Saurabh Patil) — Sat, 27 Sep 2008 10:48:00 +0000

Nestle is one brand of chocolates which people of my age and even elder than me have grown up munching. On basis of last year's strong growth in revenue from India, Nestle will be investing about Rs: 600 crore in year 2009, which is almost double than that of last year.

We will be doubling our investments in India next year. There is no envelope to the number as long as it is strategically and economically sound investment,

said Peter Brabeck-Letmathe, chairman of Nestlé SA.

The inflation has also struck companies and the pressure of increased raw materials problem worries even Nestle. But the company officials said the solution for this will be planned soon and only consumers won't pay for that entirely. Currently, Nestle India accounts for 1.5% of total turnover of the company - pretty low according to me considering the number of young people and especially choco-crazy girls in India. Nestle India has already registered 25% growth in the first half of this year.

As a part of its special marketing initiative to serve the needs of the price-sensitive consumers in India, Nestle has dedicated its Uttarakhand plant for designing, formulating and packaging products under Rs 10 price point. Identifying the huge growth potential in developing markets, Paul Bulcke, CEO of Nestlé SA, said that the developing markets currently accounting for one-third of its business would grow significantly. The company also sees the recent Chinese milk scare as an opportunity to provide safer options for consumers rather than a threat to its sales.

The company will continue to grow from being an agri-based to a nutrition, health and wellness company with a focus on regional products.

TATA's face Singur farmers: But what's the exact problem in Singur?

noreply@blogger.com (Saurabh Patil) — Sun, 31 Aug 2008 02:57:00 +0000

TATA MOTORS is facing tough opposition from the Singur farmers (Singur is a village in West Bengal) where it wants to set up the manufacturing plant for the production of the world's cheapest car - TATA's 1 lakh car- TATA NANO. Singur farmers are not ready to give there land even after compensation of about Rs:8 lakh per acre of land and even more for farms which produce 3 crops/year, or which have plots nearer the main road and fields that have tubewells sunk in them. The issue has now taken a form of agitation and TATA is facing wrath of it. According to the The Times Of India TM people from Trinamol Congress have threatened TATA officials and people who work in a small plant set up there to physically prevent from entering plant, and according to the fresh news 5 hours back TATA has decided to move out its 800 employees out of singur plant.

The farmers complain about 2 things - first is about the low compensation and the second is about the lack of faith in getting the promised money from government - and from my point of view these are truely issues worth talking about! This is what one of the farmer Prasenjit Das in Khaserbheri village says "What use is cash to me? Putting money in the bank and earning interest is not enough, especially looking at the rising inflation. With land, my asset remains intact and what I earn from selling my produce is a bonus." Das has another argument to press his case: "Even if the government promises to give me a job, it fails to secure my children's future." - perfect! I agree with him! Why not...nice to see that villagers and farmers- heart of India are understanding the economic factors and inflation concepts.

The question is about the land spanning 997 acres of land, and farmers aren't sure whether government will give them the promised money or not. According to Hindu Business Line article on Nov 16th 2007 -> "The acquisition of the entire 895 acres of private land is virtually complete. Each of the landowners has given his consent to acquisition at prices which are much higher than the prevailing rates. We have already disbursed payments for 550 acres and the rest will be completed within this month," the State Commerce and Industry Minister, Mr Nirupam Sen, told media persons.. So, today is 31st Aug, 2008 - it's been 9 months after this statement from Mr.Nirupam Sen and still the payments aren't in the hands of farmers..? If yes then they shouldn't be agitating and if no then the governemnt has to answer why farmers haven't been paid uptill now?

If TATA decides to withdraw now, they will suffer losses of about Rs:150 crore - and they need to withdraw as per the prevailing conditions in the Singur. While the West Bengal government gets ready to acquire close to 50,000 acres all over the state for a slew of SEZs, ports, roads and so on, it should be a good idea to look at this other side of the story.

This wraps up the complete story till now behind the fight for land, the business people on one side, farmers on others and government in between - who's to blame?? This is not only in Singur, this problem is in many parts of the country since the developments of SEZ's have starting gaining pace.. what's the solution...? Expres yourself in comments...

With Help From Sources: RediffNews, HinduBusinessLine, EconomicTimes.

What is consulting?

noreply@blogger.com (Saurabh Patil) — Sun, 10 Aug 2008 14:15:00 +0000

Consulting is nothing but guiding anyone to achieve his/her targets. Today consulting has become a form of business, where consulting companies guide other companies( clients ) to achieve the target. Now the target can be anything. But there are many companies/people who call themself as consultants but aren't actually. Today you will find many people and consulting companies which are not exactly guiding, they may be helping but not guiding. Innovation in the way work is done lies at the core of consulting, but is very rarely seen in many consulting companies. To be a good consultant you should know in depth about the client's business, you should know the pitfalls in every way you have to acheive what client wants and then follow one which is optimal for the client. Now all this calls for knowledge, experience, being updated on latest things in that business and ofcourse a lot of creativity. The one who has all these things and puts all this into use is a good consultant. Also the adaptability to various plans and situations is important. All this implies that all the consultants should have better understanding of the business domain, lot of experience and should have farther vision than the client - and thats why I feel something fishy when I see a person of age 23 at some consulting company consults the client's project whose project manager is himself 40 years old! Strange itsnt it..? Well, Bruce Eckel also has to say something about this.. visit his post here..What is Consulting?

Comments are welcome!!

Franchise Business in India

noreply@blogger.com (Saurabh Patil) — Thu, 03 Jul 2008 16:07:00 +0000

India is called a developing country, as we don't have another classification as a rapidly developing country. Let me today put some light on India in the franchise business.(Hey hey if you don't know what franchise business is and what exactly you should do to own a fanchisee then you should first read : What is a franchise business??.) The Franchise business isn't new in India and it's early days date back to 1990's. Today India has many franchise businesses of foriegn brands like KFC, McDonald's, Holiday Inn, Gold's Gym, Marks and Spencers and they have reached not only first tier but also many second tier cities in India and they are running successfully.

After 1990 the franchise business has boomed by leaps and bounds and there are many success stories to tell. Franchise business industry in India records a growth of 30%-35% per year from the past 5 years. And yes why not, because the core thing for any business to be succesful is the customers. And India has lot of it- and the world knows this, as a result many multi national companies are happy to offer franchise to Indian businessmans. One of the latest offering I know is of "beard papa's" from Japan. They are an international quality brand when it comes to cream puff's and they are inviting Master Franchisees.

The 4 sectors which have show the most rapid growth in franchise business in India are telecom sector, food sector, retail sector and education sector. These are all poised to grow with rate above 40% per annum atleast for the next 5-6 years. Food and retail sector have seen tremendous growth because the spending power of indian middle class is increasing. Read a splendid article about India's retail sector - India's retail sector is Boooooming...??.

Apart from these 4 sectors, the brewerage industry,health,beauty, and tourism are next to sparkle. India has favourable conditions for any fresh business to florish, also the competition is not as intense as in US and there are a lot of customers-hope you know that India is second largest in population- you don't need to be the king of your sector, you can be not even in top 10 but still you business may grow by leaps and bounds and you will have good profit margin. Couple this with the low rate of francise failure in India and significant return of investment and you will realise India's potential in franchise businesses.

Airbus views demand for 24 thousand aircrafts!

noreply@blogger.com (Saurabh Patil) — Sat, 17 May 2008 19:19:00 +0000

Aircraft manufacturer Airbus foresees a demand of 24,300 new passenger and freighter aircrafts which are valued at about $2.8 trillion. This visualization is for the period till 2026. The Annual Global Market forecast of Airbus says that it will create an average annual delivery of around 1,215 aircrafts, which is certainly a big number. Although this will give a boost to manufacturing sector of airplanes but there are two grave problems to this growth. First is the fuel cost. As the world knows, the fuel prices have risen sharply in past 2 years which was not even foreseen by the economy analysts. This sudden rise in fuel prices (A nice article about this: The Price Of Oil: affecting factors and it's future...) is another game of the gap between supply and demand. By, 2026 the fuel burnt per 100 passengers per Kilometer is expected to be 3 litres!

The next problem is of the air traffic. Even today the Air traffic controllers are having a tough time to resolve the traffic problems. In world's most developed cities like NewYork, Los Angeles, Hong Kong and even our own amchi Mumbai the condition is very close to saturated. The condition in 2026 will be horrible if no solutions are put in place. One of the solution to increase efficiency is to discontinue the old planes which consume more fuel and deploy new planes. But again the degree of practicality is associated with it. In India, the aviation sector has seen a downfall in last 6-10 months and there is a very tough competition. Even the customers will be increasing in future, the scenario will be same. Invest wisely in Aviation sector.

Reliance Power IPO - how should a retail investor approach it?

noreply@blogger.com (Saurabh Patil) — Fri, 18 Jan 2008 03:02:00 +0000

Reliance Power IPO is causing daily news and todays is its last day of offering. The price band is 405-450. This is 4th day - the last day and untill tommorrow the issue was over subscribed about 38 times - I dont know exact figures but it will be around it. Now should you apply to this one or not?
I think its not a good company to remain invested in. Relaince Power have no mega projects going on - all it has are promises. Other power companies in India like Tata Power, NTPC look more strong than Reliance Power, just for comparison NTPC will have a capacity double to that of Reliance Power in 2016 - even we consider all the promises of Reliance Power to be true. I feel we should make just listing gains in this IPO as i think above 800 the Reliance Power share is over priced.

Can world’s cheapest car – Tata’s 1lakh car- co-exist with prestigious brands like Jaguar and Land Rover?

noreply@blogger.com (Saurabh Patil) — Fri, 21 Dec 2007 15:15:00 +0000

A particular motor vehicle company is seen to concentrate mainly on one range of products, be it Toyota, Nissan or BMW, they are known for a particular category of cars. As the world now knows TATA MOTORS is out to create the world’s cheapest car! It will cost INR 1 lakh. That is equal to around US$2700 only!

But, Tata Sons Chairman Ratan Tata has said it is possible for the world's cheapest car to co-exist with prestigious brands like Jaguar and Land Rover despite an image disparity. He says if the brands like Nissan and BMW have the mini versions of cars why can’t TATA MOTORS, and he is pretty confident about this. Toyota has “Lexus” and Nissan has “Infini” and BMW has its “mini”. So, the market competitors are now trying to prove their skills in other range of their products and why not?? It’s getting them more business; they are giving low price cars to the people, which is good for a common man to fulfill his dream of having a car; and the makers are world renowned market leaders so the quality can be assured.

The world is waiting to catch a glimpse of the much touted Tata’s 1 lakh car, which would be unveiled at the Auto Expo in New Delhi on January 10. The car market is said to experience the decade’s greatest metamorphosis after the actual on-road launch of this highly spoken Tata’s 1 lakh car.

What are p-notes? - restiction on which caused SENSEX to fall 1744points on 17th Aug,2007 and Market closed for an hour!

noreply@blogger.com (Saurabh Patil) — Sat, 20 Oct 2007 07:50:00 +0000

The 30-share index, SENSEX; which reached a life-time high this week, crashed 1744 points, after the SEBI put up its suggestion late on Tuesday evening. The market was closed for an hour. The p-Notes are said be behind the hugh surge in foreign inflows, which caused the latest market rally. "The steps taken by SEBI are in the right direction," the Finance Minister P.Chidambaram said. The Securities and Exchange Board of India (SEBI) on Tuesday proposed to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note (p-Note) route. The move is aimed at arresting the surge in foreign inflows through p-notes.

So, what are these p-notes? Why such a havoc about them? What makes them so special? P-Notes are financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. Participatory notes are like contract notes. These are issued by FIIs to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI. SEBI was not very happy about participatory notes because they have no way to know who owns the underlying securities, it feared that hedge funds acting through participatory notes will cause economic volatility in India's exchanges.

I feel that this step taken by the SEBI is good step towards improving clarity of FII investments. Many are saying this should have been done a lot before, say 6-7 years back. But at that time p-notes were not that much a highly weighted investment instrument by the FII. As a report says "the notional value of PNs has zoomed from 20% of FII/sub-account assets in March 2004 to 51.6% in August 2007, in other words from Rs 31,875 crore to Rs 3,53,484 crore!". While FIIs were net investors to the tune of $8.5 billion during the last calendar year, expectations are that they would invest close to $12 billion this year. This would take the market's exposure to P-Notes to over $5 billion, if the same ratio were maintained for the next three months.

What exactly were the restrictions put by SEBI on p-Notes - check out in next post.

India's Retail Sector is Booooming...?

noreply@blogger.com (Saurabh Patil) — Sun, 14 Oct 2007 14:50:00 +0000

Retail in India has gained a surprising importance in past year as we see many corporate gaints investing in billions into this sector. India has topped the AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market -- one of India's fastest growing industries -- is expected to grow from US$ 350 billion to US$ 427 billion by 2010. According to Euromonitor International, the Indian Retail market will grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost 7 per cent a year.

The food Retail and Mobile Retail is growing at a high pace. Reliance Retail, a subsidiary of Mumbai-based petroleum gaint Reliance Industries, has opened around 100 fruit and vegetable stores under "Reliance Fresh" brand in less than a year, already invested around Rs:2500 crore (US$ 0.637 billion!) and plans to invest about Rs:90,000 crore ($22.99 billion!) in setting up retails stores in various formats- hyper markets-supermarkets, speciality stores, discount stores...etc. Also Bharti Wal-Mart is setting up itself to enter into this sector soon. So look out for more billion dollar investments in these sector in comming year 2008.

Reading all this how's you feeling? Mind blowing reports with huge numbers about India's Retail sector, feeling great? Read next.....

Very few people think of the other part. The government decision on January 24 allows up to 51 percent foreign direct investment (FDI) in “single brand” retail stores. Nike, Nokia or Levi can establish stores, but multi-brand retailers such as Wal-Mart and Carrefour are excluded, for now. Commerce and Industry Minister Kamal Nath told the leaders of the world’s richest corporations that India was seeking to increase its FDI to $US10 billion by 2006-2007, up from the $6.5 billion invested in 2005.Retail activities such as door-to-door selling, street carts and market stalls, act as a last resort for the unemployed, given the lack of jobs in manufacturing and agriculture. Many in the retail trade are living below the poverty line. A report published in December 2004 by the Centre for Policy Alternatives (CPAS) entitled “FDI in India’s Retail Sector: More Bad than Good” stated that retailing is “probably the primary form of disguised unemployment/underemployment in the country”.The report continued: “Given the already over-crowded agricultural sector, and the stagnating manufacturing sector, and the hard nature and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector. Here, given the lack of opportunities, it is almost a natural decision for an individual to set up a small shop or store, depending on his or her means or capital. And thus a retailer is born, seemingly out of circumstance rather than choice.” The report is spelndid, you can view it here :- http://72.14.253.104/search?q=cache:eZn1OLJE7PcJ:indiafdiwatch.org/fileadmin/India_site/10-FDI-Retail-more-bad.pdf+retail+sector+in+india&hl=en&ct=clnk&cd=13&gl=in

Although the Indian government hails foreign investment as an economic boon, the growth has largely benefitted the wealthy to the detriment of large sections of workers, small business and farmers. The opening up of the Indian economy and deregulation has resulted in substantial public sector job cuts, the destruction of industries, land seizures and cuts to food and fuel subsidies. There are approximately 40 million people and 11 million outlets in India’s retail sector. Many of these are marginal businesses—small shops and stalls, street vendors and hawkers—which will be destroyed by competition from large retail outlets and chains. Many people, who have no alternate source of income or work, will be left completely destitute.

(I have written this article with lot of research. I want to know your comments over this.Thank you.)

Are small caps better then large caps or mid caps in bearish markets ?

noreply@blogger.com (Saurabh Patil) — Sun, 19 Aug 2007 06:11:00 +0000

When you look at the statistics of recent downfalls in sensex, you will notice that small cap index BSE Small Cap is the one which has been least badly hit, than compared to BSE SENSEX, BSE MIDCAP or BSE 100. I have always considered small cap investment as risky investment but these satistics made me think the other way. I would have been pleased to post the exact numbers here but im not getting past values right now. I will be back with them very soon. Till then just to keep you thinking, here is a comparison, in the past 3 months, BSE Small Cap have grown by +6.7% , BSE MIDCAP have grown by +2.8% and BSE SENSEX fell by -1.1% !

Reliance Mutual Fund presents Fixed Maturity Plans.

noreply@blogger.com (Saurabh Patil) — Fri, 06 Jul 2007 01:20:00 +0000

Hello friends,
I got a post from Reliance MF some days ago which had my account statements of Reliance MF I hold and also mentioning about their new plan called "Fixed Maturity Plan" (FMP). As you all know that Fixed Deposits are one of the safest way of investment. But its drawback is that the rate of return is very very low. Most FD's offer only up to 8.25%, for about 1-3 years of lock-in period. Also the returns are taxable ( 33.99% ) depending on the level of your income. Another safe investment is PPF (Public Provident Fund). But PPF has lock-in period of 15 years ( Note:you can withdraw part of your contribution only after completion of 6 years) - so its just toooooo long. ( I personally treat PPF not for our generation - but for next generation.) Also there is another option of RBI Savings Bond, but there NRI's cannot invest and premature encashment is not allowed. Reliance wants to provide a blend in this type of reliable investment adding flavours of attractive returns, choice of Maturity periods, and tax efficient returns. They have come up with FMP.

FMP offers various maturity period options - monthly / quarterly / half yearly / yearly and more than one year. You can invest depending upon your requirement of cash flows on maturity. FMP offer minimal risk as compared to normal open-ended debt funds. These open-ended debt funds are associated with 3 kinds of risks : interest rate, credit and liquidity risk. Last but not the least feature of FMP is that it provides tax-benefit. For FD's tax rate is 33.99%, but for FMP's its 22.66% and also indexation benefits are available. If we assume 10% rate of interest/year and compare FD and FMP then calculations tell that assuming 5% indexation rate, and considering tax deductions, we actually get 6.61% for FD and 9.86% for FMP. More information can be found on www.reliancemutual.com

I personally think its a good choice of investment rather than normal FD's of nationalised banks. Only one concern is that, even FMP have very very low risk, they still are venerable to market ups and downs and FMP don't offer guaranteed returns, but it is likely to yield better than FD's. You can also get benefit of double-indexation, where you can get indexation benefit of 2nd year by remaining invested just for some time more than 1 year. So you get benefit if total 2 years, instead of 1 year. Your comments are awaited.

Chips Down for IT

noreply@blogger.com (Saurabh Patil) — Mon, 02 Jul 2007 13:52:00 +0000

Between February 19 and April 2, the BSE IT index lost 16 per cent! And most equity oriented mutual fund investors were hit by this, with some fund managers maintaining as much as 42 per cent of their fund's assets in this sector. In fact the average exposure of the equity diversified fund category to the technology sector was much as 16.20 per cent! (as of February 28).
But what has caused this sudden blip? Ever since the rupee started appreciating, the BSE IT index started slipping and by May 30, the index had lost as much as 10 per cent (between January 2 and May 30). And when the chips went down, mutual funds were not far behind in offloading their stake in the sector, with 148 equity diversified funds collectively offloading close to Rs 930 crore from the sector. And they did just as well for this move, for while the BSE IT index was in a bear grip, most equity diversified mutual funds were hitting their 52-week highs by June 1, 2007. Domestic mutual funds have surely learnt from their mistakes of 2001.The fear of the rupee appreciation becomes alarming because the Indian technology sector is mostly export led. When the rupee starts appreciating against the dollar, all Indian exports become less competitive in the global market. Earnings then take a hit. While most technology companies have various rupee hedging mechanisms in place, such a drastic appreciation of the currency in a short span of time has taken everyone by surprise. Take for instance the fact that by April 13 this year; Infosys Technologies had put its rupee outlook for the financial year 2008 at Rs 43.10 against a dollar and by April 25 the rupee stood at 40.97 to a dollar.So what is the take away from these developments? Should we start redeeming our funds that are heavy on the tech sector? Well, it is still premature to take such a drastic step. The fact remains that as on June 21 the one-year average return of technology specific equity funds is still unbeatable at 63.83 per cent. With the economy growing impressively, an appreciation or strengthening of the rupee is inevitable. This is bound to hit the earnings of the technology sector and those of other export oriented sectors. So one can expect a rationalisation of earnings from this sector and there is no need to panic yet. Nevertheless, it makes better sense to keep your portfolio balanced across sectors. Overdependence on any sector be it technology or infrastructure will always be a risky proposition. So if you are invested heavily in a technology-specific mutual fund, you could look at reducing your stake here. If you are invested in an equity diversified fund, let your fund manager take the call on re-jigging the portfolio.

Can I give stock as a gift ?

noreply@blogger.com (Saurabh Patil) — Wed, 27 Jun 2007 02:03:00 +0000

Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. If the stock has appreciated in value, the holder can avoid paying the capital gains tax by giving it as a gift. There are two methods in transferring the ownership of a stock, which depend on how it is currently being held. Now-a-days stocks are hold in electronic form (and not in physical form) which stored in a brokerage account. To gift his stock, the owner should gather the brokerage account information of the person/party they are gifting. The next step is to contact the gifter's broker, pass on the new account information, and order the electronic transfer to the other person/party.

Inflation eases to 13-month low, at 4.28%

noreply@blogger.com (Saurabh Patil) — Sat, 23 Jun 2007 14:29:00 +0000

The wholesale price index-based inflation declined sharply to a 13-month low at 4.28 per cent for the week ended June 9, down from 4.80 per cent in the previous week.

Inflation was at 5.29 per cent in the corresponding period of the previous year. Higher comparative prices last year during the same week (the base effect) and a decline in prices of primary food articles contributed to lower wholesale inflation.

Finance Minister P Chidambaram attributed the fall in inflation to monetary tightening by the Reserve Bank of India, but said, “It is too early to draw any conclusion. We need to watch inflation in the next 4-5 weeks”.

Analysts agree with Chidambaram’s views. “Various measures taken by the RBI and the government have started yielding results. However, market remains concerned about prices of primary articles,” said Arun Kaul, general manager (treasury), Punjab National Bank.

India iron ore sales to China drying up...

noreply@blogger.com (Saurabh Patil) — Thu, 26 Apr 2007 12:10:00 +0000

Place: Mumbai

India's once vibrant iron ore exports to China have slowed to a trickle because of a crippling export duty imposed by New Delhi, and orders may dry up entirely if world prices retreat from recent highs.The policy move may leave Indian ore producers, who have been expanding production in the hope of more overseas sales, struggling with surplus material, as Chinese buyers shift their focus to relatively cheaper cargoes from Australia and Brazil.

"There is buying, but it is quite subdued. They are really quite wary," said Rahul N Baldota, vice-president of the Federation of Indian Mineral Industries.

Orders from China, which buys nearly two-thirds of India's iron ore exports, are vanishing after the government slapped an export duty of 300 rupees, or $7.21, per tonne in this year's federal budget.The Indian government, after intensive lobbying by the country's booming steel industry, is trying to discourage exports of the commodity to protect against over exploitation of the resource.Nearly 80 percent of India's exports of iron ore are fines, which need to be made into pellets or sintered before being used in steel mills blast furnaces.Since few Indian mills have the processing facility for using iron ore fines, piles of the commodity, the powdery raw material that comes out along with high-grade iron ore lumps, have started accumulating near the mines, said Sidharth Rungta, president of Rungta Mines Ltd.

Small shipments were still being sold to China as the country was straining to buy cargoes from Australia because of port congestions, which has pushed up world prices by $8 to $65 a tonne for medium-grade ore.This has so far kept Indian prices competitive, despite the new export tax, but prices are expected to fall back soon, traders and analysts said. India is currently offering iron ore fines at around $60 per tonne, free-on-board.

"The congestion in Australia is only a temporary phenomenon. The signs are that it will be over soon and international prices will fall again. It could take the wind out of whatever is remaining of India's exports," said Baldota.Traders said the landed cost of iron ore imports from Australia was at $85-90 a tonne and prices could ease by $10 once the port congestion ease.

BUYERS ABSENT

China's iron ore imports in the first three months rose 23.4 percent to 100.19 million tonnes, customs figures showed.In March, China imported a record 9.84 million tonnes of iron ore from India, despite the introduction of the export tax, as most of the cargoes were contracted before the tax was announced. But Chinese imports of Indian iron ore are likely to halve in April, compared with March figures.

A Shanghai trader said he was seeing some Indian ore traded in the Chinese market, but volumes had dropped substantially.An official at the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters said Chinese mills were not signing fresh contracts to buy Indian ore.While international iron ore prices were high now, Rungta said he was not bullish in the longer term as Brazil and Australia were expanding mining capacities.

"These are bound to put pressure on Indian exports," Rungta said.

Senior ore industry officials, who did not want to be identified, said that they were hopeful that the government would soften the blow from the iron ore export duty as a high-level panel was reviewing the move.

SAIL's joint venture for steel plant

noreply@blogger.com (Saurabh Patil) — Thu, 26 Apr 2007 12:04:00 +0000

MUMBAI
State-owned Steel Authority of India Ltd.(SAIL) said on Thursday it is exploring setting up a 4 million tonne integrated steel plant in a joint venture with Rashtriya Ispat Nigam Ltd. and National Mineral Development Corp.

It said a memorandum of understanding for the proposed plant in the eastern state of Chhattisgarh would be signed after receiving necessary approvals.Ahead of the news, shares in SAIL eased 0.04 percent to 134.05 rupees in a slightly firmer Mumbai market.

Sandip Sabharwal: Bull market may continue...

noreply@blogger.com (Saurabh Patil) — Sun, 15 Apr 2007 03:39:00 +0000

In the past two months, global markets have fallen substantially on inflation fears and central banks’ responses to the same. The inflation argument in India has been carried forward too far. In reality, inflation has little impact on the direction of stock markets. An analysis of the past 20 years’ history of the Indian market reveals there have been bear markets in periods of very low inflation and bull markets in periods of very high inflation. For example, the Japanese market had been in a bear phase for years, during times of zero interest rates and negative inflation. To understand the impact of inflation on markets, we have to understand why there are inflationary pressures. Inflation picks up where there is growth and declines when growth slows.

Today, when growth is picking up in Japan, the market is doing well and is expected to do well, as long as the economy expands, companies increase profits and consumers are confident. The era of very low inflation seems to be over globally. The faster central banks globally come to terms with this fact, the better it is for the global economy. This is because, contrary to the 1980s and 1990s — when growth in the world economy was not as widespread as it is today, and overall growth was driven by growth in the US, Europe or South-East Asian Tigers — today, there is growth all around. China and India have emerged as strong engines of growth. Other BRIC economies, as well as Middle East economies, are growing at 7%-plus. Growth in Europe has also picked up and Japan is growing after more than 15 years. Even Africa is growing at rapidly, driven by a commodity bull cycle. Such widespread growth will lead to inflation.

The second factor is that currently, there is very high inflation in metals, oil and agri-commodities. Agri-commodity inflation is mainly due to two reasons — firstly, growing prosperity worldwide is leading to increased consumption of food grains; secondly, diversion of products like palm oil, corn etc to bio-fuels production is creating a demand-supply gap in these products. It is unlikely that agri-commodity inflation will come down anytime soon. This is because, increasing production of agri-commodities is a long-term process; it involves increasing acreages and improving productivity, which cannot be done in a year or two. Monetary policy can do little to reduce agri-commodity inflation.

Under these circumstances, the response of central banks becomes critical. Under the current scenario, excessive monetary tightening may not reduce inflation significantly, but it can impact growth negatively, as costs for corporates rise and consumer demand is affected. The US Fed seems to be realising that excessive tightening can take the economy to recession, without bringing down inflation significantly. Over a period of time, as supply of various commodities increases, inflation will reduce to a certain extent. Moreover, the impact of monetary policy on demand is normally felt 18 months after the action.

In the current situation, when interest rates have already risen substantially over the past four years, a policy of status quo is desirable. Given the current interest rate scenario, economic growth in India is likely to slow down to around 8.2% for FY08. However, long-term growth prospects remain bright and the next 10-15 years should see average growth of 8-10%. Overall view on the equity market remains positive for both the medium and long term. The market is trading at valuations of 14.7x ’08E earnings on the large-cap side, while mid caps are trading at a substantial discount at 11.5-12x ’08E earnings. From these levels, the downside to the market looks limited. Over the next few days, the market can potentially move down by 6-7%. But from there, it should be able to give a return of 18-20% p.a. over the next three years.

The bull market may continue over the next few years. But the Indian market is now integrated with global markets. Global market movements, like that of May ’06 and February ’07, will affect the market in the short run, but in the long run, individual markets will perform on their own merits.

Originally By Sandip Sabharwal - CIO,JM Financial Mutual Fund.

India - Pakistan Trade Surges...

noreply@blogger.com (Saurabh Patil) — Sun, 15 Apr 2007 03:39:00 +0000

ISLAMABAD: Trade between India and Pakistan is surging despite problems in movement of goods and people. Pakistan registered a six-fold hike in its exports to India in the last five years. It is expected to go up further with new trade concessions announced by India last week. Bilateral trade swelled from $235.74 million in 2001-02 to more than $1 billion last fiscal year. The balance of trade remains in India's favour.

In recent times, India and Pakistan have opened banks in each other's territory, resumed shipping services and improved cross-border road and rail transport. According to a trade analyst, the share of Pakistan's exports to India in overall exports increased from a mere 0.5 percent in 2001-02 to 1.8 percent in 2005-06."This is a six-time increase in Pakistan's exports to India in the last five years," an official of the Karachi Chamber of Commerce and Industry said. Pakistan's exports to India have increased from less than $50 million in 2001-02 to about $300 million in 2005-06.

Simultaneously, Indian exports to Pakistan too surged from $186.52 million to $802 million, up from 1.8 percent to 2.8 percent Pakistan's global imports. In these five years the balance of bilateral trade remained in favour of India. In 2005-06, it rose up to more than $500 million.
Pakistan supplied chickpeas, pulses, grains and sugar when these were in short supply in India. India supplied onions, potatoes, pulses and other food items to Pakistan. India's exports of engineering goods now exceed $10 billion. Pakistan meets its 25-30 percent requirements of engineering products from imports. India can be a good source of engineering products with freight advantage and relatively quick delivery and after-sales service.

Airports also take Wings...

noreply@blogger.com (Saurabh Patil) — Sun, 15 Apr 2007 03:39:00 +0000

Much to the delight of air-travellers, most of the 35 non-metro airports in the country will be modernised by 2010. Expressing optimism, the civil aviation minister Praful Patel says "Work is satisfactorily progressing at these airports and we are sure that most of them would be ready within next three years." According to estimates, close to Rs: 4,662 crore would be spend for developiong the airside and terminals of these airports. Whereas city side development will require about Rs: 1,500 crore. The development of airports in northeastern states will be done according to priority, because sometimes its the only means of travel in those regions.
Three new greenfield airports are being planned for northeast. The first - for ATR 72 operation- will be constructed at Pekyoung in Sikkim at approximate costs of Rs: 340 crore.Other proposals are for airports at Cheithu in Nagaland and in Itanagar.Guwahati airport in assam is also undergoing modification at a cost of Rs:32.4 crore.The 35 airports to be modernised are: Ahmedabad, Amritsar, Guwahati, Jaipur, Udaypur, Thiruvananthapuram, Lucknow, Goa, Madurai, Mangalore, Agatti, Aurangabad, Khajuraho, Rajkot, Vadodara, Bhopal, Indore, Nagpur, Vishakhapatnam, Trichi, Bhubneshwar, Coimbatore, Patna, Port Blair, Varanasi, Agartala, Dehradun, Imphal, Ranchi, Raipur, Agra, Chandighar, Dimapur, Jammu and finally PUNE!Currently the airports in Delhi and Mumbai are in process of modrnisation and first phase will be over till 2010.
The Planning Commision says that the next five-year plan will emphasise the provision of infrastructure at airports"at a much faster pace" to cope with massive growth of aviation sector. Transportation infrastructure plays a vitol role in shaping business locationand urban development. Airports today are more than avation infrastructure.