Stock Picks - Please read disclaimer in Earlier Posts

Following are the stock / index ideas for the week of 4th of January 2010.

• Nifty - this index is in the heavy resistance zone from 5250 – 5300 so be careful trading in it.
• Aban Offshore - CMP 1331. This stock can test 1370 / 1388. Stop loss at 1300
• Target 1 Completed with a day high of 1374.6
• Target 2 completed with a day high of 1452.65 (7th January 2010)
• Adani Enterprise – CMP 451. This stock can test 464. Stop loss at 432
• Target completed with a day high of 463.95
• Target completed with a day high of 519.4 (7th January 2010)
• MTNL– CMP 77.6. This stock can be bought with a target of 80. Stop loss 74.6
• MTNL target completed with a day high of 87.25. Up over 10% in the day itself

Please be very careful while trading in the current markets as it looks like the market can tank on one bad news. Also, we continue to remain bullish on RNRL and bearish on Reliance Industries. We sold reliance at an average of 1150 during mid-December and transferred the same amount to RNRL. However Reliance Industries has strong support till 1050 which if broken could take it to lower levels.

RNRL up by 5% today and Reliance industries down by 0.63% today.

Please note that the updates to the blog are posted in green i.e. blog was posted on 4th January 2010 and then the updates to the same are provided in green on the 5th of January 2010.

Sectors to look for in 2010.

This is the end of the calendar year 2009. The year started with a depressed market. However, the market sentiments made a U-turn in the course of the year and the markets are closing with over a 100 percent gain from their lows. Positive sentiments are prevailing in the markets.

The market will appreciate even further from the current levels as the world economy is improving and the earnings of domestic companies would gain momentum in the coming few quarters. In general, every stock with strong fundamentals has the potential to gain during a bull run. However, some sectors usually perform better than the others.

Investors have to analyse the economic and business conditions, and figure out the favourably-placed stocks and sectors in order to get better returns in the markets .

Based on the current situation , these are some of the sectors that are expected to perform well in the medium to long terms:

1. Information technology:

The information technology sector has performed very well during the second half of 2009. Positive developments in the global economic conditions have kept the IT stocks in a bullish mode. As economic conditions are improving in the developed markets, these stocks will perform well in the near to medium terms.

However, investors should track the currency movements in the international markets. The sharp appreciation of the rupee against the dollar can play spoilsport for these stocks. Investors should invest in large-cap companies with strong balance sheets for better gains. These companies also have a wider base and more power to hedge against sharp currency movements.

Stocks to look for: TCS, Infosys, Wipro, Tech Mahindra.

2. Auto:
The automobile sector is another one where stocks appreciated significantly this year. Most of the frontrunning companies in the auto sector have managed to show good volume growths during the last few months.

The volume growth is expected to remain strong given the positive sentiments of consumers and availability of easy financing. Those invested in this sector can stay invested with a short to medium term perspective.

Stocks to look for: Maruti, M&M, Tata Motors, Hero Honda.

3. Public sector units:
Investors can look at taking positions in select public sector unit (PSU) stocks. There are talks on consolidation, disinvestment, increasing the public holding etc.

These stocks are also good for diversity in a portfolio. Investors should do their homework before taking any investment decision.

For example, the proposed disinvestment is not going to change anything from the control perspective of PSUs and the money collected as part of this disinvestment would mostly go to the government.

Stocks to look for: NTPC, ONGC, SAIL, SBI.

4. Hospitality:
As the domestic economy is coming back on to a high growth path and the world economy is coming out of recession, the hotel industry is expected to benefit. Currently, India accounts for around 0.5 percent of world tourism.

A strong GDP growth, improving infrastructure, confidence in the country's economic prospects, and open sky policy has improved the outlook for the tourism industry here. This positive outlook would increase the number of foreign tourist arrivals in the country.

Domestic tourism is also gaining momentum due to increased confidence of consumers, rising disposable incomes, cheaper airfares and better connectivity.

Stocks to look for: Jet Airways, ITC, IHC.

5. Power:
Power is one of the sectors that have a huge potential to grow here, but investors looking at investing in the power sector should plan for the long term (more than 2-3 years) as this sector is investment-intensive and returns are mostly back-ended.

With a stable government at the centre, one can expect more reforms and ease in terms of structural issues to execute projects.

Stocks to look for: Reliance Power, NTPC, Tata Power.

6. Pharma:
Traditionally, the pharma sector is seen as a defensive sector in the market. However, the stocks in pharma sector have given very good returns in the recent past. The pharma sector growth in the recent past has been driven by the growing middle income segment and their growing affordability, and greater access to healthcare.

The outperformance of pharma stocks is expected to continue in the medium to long terms. Pharma stocks also add diversity and defence to the investment portfolio.

Stocks to look for: Ranbaxy, Sun Pharma, Glenmark, Apollo.



Source: Economic times.

Performance of World Stock Markets, Sensex and Commodities in 2009.

Year 2009 was one of the best years for the Stock Markets in Asia. Average % change of most of the Markets in Asia was more than 50%. Nifty and Sensex grew by 76% and 81% as shown below. Other Asian Markets also did well, Shanghai grew by 80%, Hang Seng by 52% and Nikkei by 19% in 2009.


The US Markets performed well looking at the situation that was in the beginning of 2009. The TARP (Troubled Asset Relief Program) worked well for the US Markets. Dow Jones grew by 20%, Nasdaq by 45% and S&P 500 by25%.

The UK Markets performed well in 2009 with FTSE growing by 22%. Overall it was a great year for traders and investors. Most of the markets are returning to their all time high’s that were reached in 2007. We hope that in 2010 they will be able to reach their all time high.

Growth in Indian Markets:
28 out of 30 stocks advanced in Sensex. Companies like Tata Motors experienced a gain of more than 398% returns. It was the highest returns by a scrip in BSE30. Most of the companies grew by more than 100-200% in BSE. This shows th potential and volatality of the Indian Markets.

Only two stocks declined in Sensex in the year. Reliance Comm declined by 24% and Bharti by 8%.

The Net Inflow of FII was 17.5 billion. The wealth of the investor in BSE almost doubled in the year 2009. Please find below the data for your reference:

Commodities Performance in 2009:

The two commodities Gold and Crude performed well in 2009. Gold grew by 24% and crude by 114% as shown below.

Wish You & Ur Family All A Very Happy, Joyous, Peacefull and Successfull New Year 2010!!!

Another fresh new year is here . . .
Another year to live!
To banish worry, doubt, and fear,
To love and laugh and give!

This bright new year is given me
To live each day with zest . . .
To daily grow and try to be
My highest and my best!

I have the opportunity
Once more to right some wrongs,
To pray for peace, to plant a tree,
And sing more joyful songs!

Wish you & Ur Family A Happy, Peaceful, Joyous and Successful Year 2010.

Warm Regards,
DENIP Consultants Pvt. Ltd.

Generating Retirement Benefits - Defined Contribution.

Defined Contribution Process.

In this process the individual takes the risk of the investment. There is a defined amount that is invested by the individual. There is no amount guaranteed as the final return in this method and the final benefits are unknown. The rate of earning of the investment will determine the final benefit.

Types of Defined Contribution Process:

1. Provident Fund (PF):
It is one of the major source of retirement funding for people in India. Here a stipulated sum is deducted from the salary of the employee every month as his contribution to the fund. The employer also contributes a certain sum as his share to the fund.

The fund collected is invested in various instruments (majorly in debt). The earnings of the employee is in the form of interest that gets credited into the provident fund account. The total sum including the interest is paid to the employee at the time of his retirement or resignation from service.
Types of PF:

a. Statutory PF.
b. Recognized PF.
c. Unrecognized PF.
d. Public PF.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Public Provident Fund (PPF):

Provident Fund is available as in investment option only for those who are employed. For the self employed and other professionals there is an option of Public Provident Fund. The scheme can be opened with several Public Sector Banks and Post Offices.

 Min Amount of investment is Rs. 500 per year.
 Maximum amount of investment is Rs. 70000 per year.
 This is a 15 year scheme.
 It can be extended in blocks of 5 years after the expiry of 15 years.
 There is no limit to the number of extensions.
 Annual compounded earnings rate is 8%.
 Interest is credited each year, but the amount is paid on maturity.
 Tax benefit under 80C is available.

Generating Retirement Benefits - Defined Benefits.

Defined Benefits.
Here the benefits that are given to an individual are clearly defined. The person who is receiving the benefit knows the extent of the benefit that is received.

Characteristics:
• Fixed payout available to the employee on completion of certain conditions.
• Guaranteed payout irrespective of the market conditions.
• Final responsibility of ensuring payment rests with the employer, any shortfall will be made by the employer.

Types of Defined benefits
a. Gratuity:
• Gratuity is the payment that is made by the employer in appreciation of the work done by the employee. This is generally done during the time of retirement.
• Any gratuity received while still in service is taxable to the employee.
• Gratuity received by the government employee is fully exempt from Tax.
• Rs. 350000 is exempt from Tax for other employees.

Gratuity Amt = No. of years of service * Avg monthly Salary of last 10 months before retiring.
(Salary only includes basic pay and dearness allowance).

b. Leave salary:
• An employee is entitled to leave according to the rules of the employment.
• If the employee does not take leave during a specified period then:

 The leave could lapse.
 It can be carried forward in future years.
 It can be encashed.

• Encashment of leave during employment is taxable.
• Encashment of leave during the retirement is non taxable for central / state employee.
• Encashment of leave during retirement or leaving a job has specific tax treatment for the non government employee.

c. Retrenchment Compensation:
• Retrenchment is the termination of the service by the employer for any reason other than disciplinary action.
• Upto Rs. 5 lakh is not taxable.

d. Voluntary Retirement Scheme:
• In this, compensation is received by the employee at the time of voluntary retirement or terminating the job.
• It is applicable to all types of employee who have completed 10 years of service or 40 years of age.
• The vacancy caused by the voluntary retirement is not to be filled up.
• Amount receivable will not exceed 3 month salary of each year completed or salary at the time of retirement * by the balance months of service left before the date of retirement.
• Maximum amount available for Tax exemption = Rs. 5 lakh.

e. Employee Pension Scheme:
• A pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. The pension can be given to the member or spouse and children.

 If member is alive, pension to member.
 If member is not alive, Pension to to spouse and two children below 25 years of age.
 This scheme is applicable to all members who joined EPF after 15.11.1995.

Funding of the Pension Scheme
• An amount equal to 8.33% of Wages is pooled into the EPS from the Employer's contribution. ie., If a PF member gets Rs. 1000/- as monthly wages and he and his employer contributes 10% each, Rs. 100 + Rs.17 (=117) goes to Provident Fund and Rs. 83 goes to Pension Fund.
• Govt. also contributes to this Welfare Scheme at the rate of 1.16% of wages.

FII’s Net Buy in Indian Markets in FY09.

On December 23, both the Market’s (SENSEX & NIFTY) closed higher by more than 3%. SENSEX closed 539.11 points higher at 17231.11 and NIFTY closed 158.75 points higher at 5144.60. This was because of the Net Buy by FII’s is Rs. 225 cr. We have seen an increasing participation by the FII’s in December month till now. The Net Buy of FII’s in December is Rs. 6630.20 Cr.

Below figure shows the day wise Gross Purchase, Gross Sales and Net Purchase / Sales by FII in December 2009.

 
We have seen high buying by FII’s (Foreign Institutional Investor) in our Markets in 2009. Both SENSEX and NIFTY have grown by more than 75% in this year. This is because the FII’s have invested lots of money in Indian Markets in 2009. In the year 2009 the Net FII buy is Rs. 75000 cr.


At the same time the risk is very high since holdings by Foreign Investors is high. Thus our Market’s dependency on Foreign Markets increase as if the Foreign Markets Increase we can see increase participation of FII’s in Indian Markets and if they fall, the FII will remove their holdings from Indian markets to recover their losses.

Below figure shows the month wise Gross Purchase, Gross Sales and Net Purchase / Sales by FII in 2009.

 
Table Source: moneycontrol.com.

Top Pics of MF's in November.

Below is the list of TOP pics by Mutual Funds in November 2009. Reliance Industries has been the top pic by the Mutual Fund houses in Nov. As given below 7270.06 cr shares were bought by them.

ICICI Bank, Tata Consultancy Services, Bharti Airtel, ITC, Axis Bank Sterlite Industries and GAIL India moved higher on the favourite stocks list while State Bank of India, Bharat Heavy Electricals, Tata Power Company, NTPC, Jindal Steel & Power and Bank Of Baroda slipped. ONGC, Infosys Technologies, Larsen and Toubro, Crompton Greaves, HDFC and HDFC Bank held same position.

Table Source (Moneycontrol.com).

Birla Sun Life Tax Relief '96.

Birla Sun Life Tax Relief '96 is one of the schemes that we are promoting very aggressively for Tax Planning Season. It is a Mutual Fund Tax Saving scheme that was launched by Birla Sune Life in 1996. The schme has a lock in of 3 years. It is ranked as World's Best Performing Equity Fund by "Lipper" for its 13 years performance.

Highlights of the Scheme:

• Tax Saving.
• Wealth Creation.
• Strong Dividend History - 2200% Dividend Declared Since Inception.

Under Section 80C, you can invest upto Rs. 1 lakh in this Equity Linked Saving Scheme (ELSS) and thus save tax of Rs. 30,900.

Comparison with other Tax Saving Instruments:

Since Inception (29 March 1996), BSL Tax Relief '96 has given CAGR return of 32.57% as against the benchmark (BSE 200) 13.63%.  Thus if one had invested Rs. 1 lakh in this scheme on 29 March 1996, then its value as on 31 Oct 2009 would be Rs. 5.68 Lakh in Benchmark (BSE 200 - 13.63% CAGR) and would be Rs. 46.22 lakh in BSL Tax Relief 96 (32.57 CAGR).

Dividend History:

 

We strongly recommend our clients to invest in this scheme and tax advantage in saving tax liability and creating your wealth. Do let us know if you have any requirement in Tax Planning. We will be happy to serve you.

Thanks,
Nimesh.

Disclaimer: Mutual Fund Investment are subject to Market Risk, please read the SID before investing. Past Perfomance may or may not be sustainable in Future.

Interesting Learning Exercise - MANDI 2009 @ Europe Asia Business School.

Selling on streets was never easy for me. Being born and brought up in an environment which was always comfortable and supported by Parents, Family and Friends. When asked by my college to do an assignment which included selling toys on Street, I was initially not convinced. It took time for me to adopt to the fact that I will have to go on streets selling toys for kids to customers with whom no appointment is fixed.

I have done PGDBA in Marketing (distance learning) and also studied the concepts of Marketing @ Europe Asia Business School. But when it came to actual sales and that also on the streets, I was not convinced and thought that I will not be able to do good in this aassignment.

Brief Introduction on Mandi:
MANDI is a annual event conducted by Dr. T. Prasad. The purpose of event is to ingrain entrepreneurial spirit in the minds of young Management professionals. The event consists of selling the products by the students across the city of Pune. Students are divided into groups and earmarked to a certain area in the city. They are given a target to achieve within stipulated time. The product has to be sold at the pre-decided price to the customers. (We were selling the products for an NGO Navnirmiti http://www.navnirmiti.org/ you can get the product details (JODO, Number Balance, Tarangam) from this website).

Our day began (12th Dec 2009) with MANDI inaguration at college. We were on the field by 11 am. The first thing we did was that we decided a plan of covering the potential areas in Pune. My team consisted of myself, Amit Mandora, Alok Routray, Gargi Kumari, Shahab Syed and Tanushree Bhanawat. We were given an inventory of Rs 12,000 from college for selling on same day.

We first reached to the school St. Bishop at Kalyani Nagar in Pune. Luckily it was Saturday and it was closing time of school. We first approached a parent who was taking his child home from school. The good news for us was that the First client we approached was converted to Sale. The parents liked the products so much that they started surrounding us and asked the details about the products. We were able to sell inventory worth more than rs.1500 during the first hour of sales.

Suddenly I started realizing that the fear I had of selling on streets converted into confidence and I was able to do justice to my assignment. I started approaching parents and converted most of the calls into sales. I had few rejection from parents, but my Conversion ratio was high. This was now getting exciting and I was enjoying the job. We covered other areas like Fame Adlabs, Big Bazaar, M.G Road, etc.

By 4 pm, we were able to sell inventory worth more than Rs. 7000. We now had a few hours to go and still had an inventory worth Rs. 5000 more with us. Though we were tired, we pushed ourselves and had a belief that we will sell all the inventory and help the Children of Navnirmiti. In sales, if u think you can, you will do it. Its more important to think that you can do it. By 8:30 pm, we were able to complete all our inventory.

This was a great achievement for our team. We enjoyed our day on field and team work. It was the Team wok that helped us to achieve our targets. We were the first abnd only team to complete this assignment of selling all the inventory. For this achievement we  received a reward of Rs. 1000 from our college.

There were lots of learning that I had from this activity ranging from confidence buliding, team work, target achivement, direct sales to Capital Management. I am sure this activity and experience will help me in my venture and it has given me confidence in doing direct sales.

I will request everyone of you to contribute towards the society by helping the NGO's and also please entertain the students who are selling on the street. I was one of them on 12th Dec 2009 and if I didnt receive the support from people who were on streets, I would have never been able to remove this fear from me. Hence, please encourage these students and contribute to the society.

Thanks,
Nimesh.