Stocks, Mutual Funds, Etf's etc

January 2013

Top Debt Mutual Funds Performance as of Dec 2012

 Debt Mutual Funds Performance, Balanced Funds, Ultra Short Term, Monthly Income Plans, FMP's, Indexation , Tax Benefits

Here is the Top Balanced & Debt Mutual Fund Performers as of Dec 2012 

Balanced Fund
Scheme Inception Date Return 1 yr % Return 3 yr %
HDFC Children’s Gift Fund ~ Inv Plan Feb 09 2001 17.1 15.79
HDFC Balanced Aug 10 2000 16.83 13.44
ICICI Pru Balanced Oct 07 1999 21.8 12.16
Income Medium Term
Scheme Inception Date Return 1 yr % Return 3 yr %
SBI Dynamic Bond Jan 13 2004 11.99 9.51
Escorts Income May 22 1998 12.16 9.09
Birla Sun Life Medium Term Mar 25 2009 11.1 8.64
Monthly Income Plans
Scheme Inception Date Return 1 yr % Return 3 yr %
Canara Robeco MIP Apr 01 2001 11.54 8.44
SBI Magnum MIP Floater Nov 30 2005 10.66 8.19
Reliance MIP Dec 29 2003 15.52 8.09
Debt Floating Rate
Scheme Inception Date Return 6 mths % Return 1 yr %
FT India Life Stage FOF 50s + Floating Rate Jul 02 2004 6.39 11.14
HDFC Floating Rate Income LT Jan 08 2003 5.33 10.88
L&T Floating Rate Oct 27 2010 5.58 10.67
Debt Ultra Short Term
Scheme Inception Date Return 6 mths % Return 1 yr %
Birla Sun Life ST Opportunities Jun 27 2008 5.77 11.13
HDFC Floating Rate Income LT Jan 08 2003 5.33 10.88
Escorts Short Term Debt Dec 28 2005 5.66 10.73
Debt Income  Short Term
Scheme Inception Date Return 6 mths % Return 1 yr %
UTI Income Short Term Income Builder Jun 24 2003 5.45 10.55
SBI Short term Debt Jul 27 2007 5.52 10.52
IDFC SSI Short Term – Plan D Sep 02 2005 5.34 10.42
Debt Liquid Money Markets
Scheme Inception Date Return 1 mths % Return 3 months %
Escorts Liquid Sep 29 2005 0.81 2.46
Tata Liquidity Management Mar 01 2006 0.71 2.35
Principal Retail Money Manager Dec 27 2007 0.73 2.23

Many investors are ignorant of the advantages of investing debt funds investment avenue as an asset class. They prefer to keep funds in FD’s and other traditional debt instruments like PPF/KVP’s/NSC/Post Office etc ~ primarily due to lack of knowledge. You can know more about this debt funds here.

 

Top Equity Mutual Fund Performance based on 3 years returns

Equity Mutual Funds Performance, ELSS, Large Cap, Mid Cap, Small Cap, Index Mutual Funds, Best Mutual Funds

Here are the Top Mutual Fund Performers based on 3 years returns in the Equity Segment. The Equity asset class has outperformed every other class in the year 2012.

                                             Equity Large Cap

Scheme Inception Date Return 1 yr % Return 3 yr %
ICICI Pru Focused Equity Retail May 07 2008 22.08 11.73
Franklin India Bluechip Nov 30 1993 19.25 9.45
BNP Paribas Equity Sep 03 2004 24.04 9.16

Equity Multi Cap

Scheme Inception Date Return 1 yr % Return 3 yr %
ING Dividend Yield Oct 06 2005 18.09 11.71
BNP Paribas Dividend Yield Aug 30 2005 24.32 11.55
L&T India Special Situation Apr 26 2006 28.87 10.62

Equity Large & Mid Cap

Scheme Inception Date Return 1 yr % Return 3 yr %
Quantum Long term Equity Feb 25 2006 23.69 11.78
UTI Opportunities Jul 20 2005 23.2 11.78
Canara Robeco Equity Diversified Sep 12 2003 24.7 11.51

Equity Mid & Small Cap

Scheme Inception Date Return 1 yr % Return 3 yr %
SBI Magnum Emerging Businesses Sep 17 2004 38.68 24.6
Reliance Equity Opportunities Mar 07 2005 34.07 17.32
Canara Robeco Equity Opportunities Feb 24 2005 33.92 17.21

Equity Sectoral

Scheme Inception Date Return 1 yr % Return 3 yr %
SBI Magnum FMCG Jul 03 1999 53.33 36.11
ICICI Pru FMCG Mar 30 1999 43.05 27.87
Reliance Pharma Mat 26 2004 28.88 20.87

Equity Tax Planning (ELSS)

Scheme Inception Date Return 1 yr % Return 3 yr %
Canara Robeco Equity Tax Saver Mar 31 1993 24.43 12.27
Reliance Tax Saver Aug 23 2005 31.83 12.23
Franklin India TaxShield Apr 10 1999 21.36 11.79

Equity Index

Scheme Inception Date Return 1 yr % Return 3 yr %
HDFC Index Sensex Plus Jul 10 2002 21.45 7.67
Quantum Index Jun 20 2008 22.54 6.45
LIC Nomura MF Index Nifty Nov 28 2002 21.32 6.02

Hope this will help is choosing the mutual funds. Of course, before investing, ensure to check the various Fund management charges involved and other risk performance measures. Read further to understand how do you compare and evaluate MF performance measures.

December 2012

Investment in Mutual Funds & KYC Compliancy requirements

Investment in Mutual Funds ,KYC Compliancy requirements, KYC Change Detail Form, SEBI, in house person verification.

Securities and Exchange Board of India (SEBI) has prescribed the requirements, for the implementation of Uniform Know Your Customer (KYC) process across all intermediaries registered with SEBI.
Pursuant to the above, the existing / new investors of Mutual Funds are required
to take note of the following:

1. Investment by Investors who are KYC Compliant through KRAs (KYC Registration Agency) on or after January 1, 2012 :
No action is required by such investors and they may invest in any Mutual Funds. However,
Non-individual entities like Corporate, Partnership Firm, Trust etc are required to submit their Balance Sheet for every Financial Year on an ongoing basis within a reasonable period to KYC Registration Agency (KRA).

2. Investment in existing folios by Investors who are CVL MF KYC Compliant prior to January 1, 2012:
In case of the existing investors who are CVL MF KYC Compliant through the erstwhile
centralized KYC registration agency i.e. CDSL Ventures Ltd. (CVLMF), there will be no effect
on their subsequent transactions (including Systematic Investment Plan) in their existing folios/ accounts. However, the KYC status of such investors will continue to reflect as “MF – VERIFIED BY CVLMF” in the CVL – KRA system.

3. Investment by new Investor who is CVL MF KYC Compliant:
In case a new investor who is CVL MF KYC Compliant wishes to invest as a sole investor or he wishes to invest jointly with another existing investor/s who is/are also CVL MF KYC Compliant, then such investor/s will have to submit the “KYC Details Change Form” along with the investment application and complete the IPV process.

4. Investment by Non-KYC Compliant Investors (Individual or Non-Individual):

Non-KYC compliant investor/s desirous of investment, are required to submit the duly filled
in KYC Application Form along with necessary documents for completion of KYC certification through KYC Registration Agencies (KRAs) and complete the “In-person Verification (IPV)” at the time of making any investment. 

5. Requirements from CVLMF KYC Compliant investors (i.e. KYC compliant prior to January 1, 2012):

I. Individual Investors:
In case, the individual investor is KYC compliant prior to January 1, 2012, the investor will
have to submit ‘KYC Details Change Form’ with respective applicable documents, (if any)
mentioned therein to update their ‘Missing/Not Available’ details besides completing the IPV process as a one time exercise. After due verification by the respective KRA e.g. M/s CVL, the KYC status will get changed from “MF – VERIFIED BY CVLMF” to “Verified by CVL KRA”.
In case of individuals, ‘missing/not available details’ are as under :
a. Father’s/Spouse Name
b. Marital Status
c. Nationality
d. Gross Annual Income or Net worth as on recent date.
e. In-person Verification (IPV)
II. Non – Individual investors:
In case of all Non – individual investors who are KYC compliant prior to January 1, 2012,
KYC process with IPV needs to be done afresh due to significant and major changes in KYC
requirements.
In case of opening of a new folio with any Mutual Fund, the individual & non-individual investors will have to comply with the respective procedures mentioned above. The above procedure is also applicable for Guardian (in case of Minor) / Power of Attorney
holder as well.

The necessary forms are available on our post – here

Simply visit Central Depository Service (India) Ltd website  , Click on the ‘KYC Inquiry’ and type in your PAN number, in order to check your KYC Status.

All the investors are requested to note that the aforesaid formalities which is mandatory from December 1, 2012 for investing with any Mutual Fund.

 

Past 6 months Sensex stocks performance

Past 6 months (Jun thru Dec 2012) Sensex stocks performance  is shown below :

Gainers Curr Price 6 months back Change(Rs) Change%
Mahindra & Mahindra 949.9 680.1 269.8 39.67
ICICI Bank 1136.3 819.4 316.9 38.67
Maruti Suzuki 1474.4 1078.9 395.5 36.66
Bajaj Auto 2080.25 1549.4 530.85 34.26
HDFC 852.35 644.6 207.75 32.23
Cipla 404.05 305.6 98.45 32.22
HDFC Bank 688.7 534.4 154.3 28.87
Tata Motors 291.9 227 64.9 28.59
Larsen & Toubro 1638.2 1296.9 341.3 26.32
Sun Pharma Inds. 716.6 582.25 134.35 23.07
ITC 295.75 244.3 51.45 21.06
Dr Reddys Lab 1833.7 1555.05 278.65 17.92
Hindustan Unilever 518.15 440.75 77.4 17.56
Reliance Industries 839.2 715.55 123.65 17.28
Tata Power 104.75 92.15 12.6 13.67
Sterlite Inds. (I) 113.2 101.85 11.35 11.14
SBI 2320.15 2154.25 165.9 7.7
Coal India 353.95 330.95 23 6.95
GAIL India 347 333.25 13.75 4.13
BHEL 224.9 217.25 7.65 3.52
NTPC 152.7 148.4 4.3 2.9
Bharti Airtel 311.95 305.35 6.6 2.16

Clearly financial services/ interest sensitivities/ banking are outperforming in the hopes of reforms and expected rate cuts. Early 2013 more noise will emerge around the budget session and reforms. Overall, equity markets look poised for a steady journey northwards.

Most retail investors are skeptical of the up move in the markets over the past few months.  And are keen to move to debt products or Gold. Are they making a mistake, only time can tell. As of now, though, it is time to enjoy the joy ride upwards…

 

NSE Stocks which have outperformed the Nifty index!!!

Outperformers-Nifty-Sensex, Indian Stock Markets, Analysis, Research, Investing, Fundamental Analysis, Business Valuation,

Indian Stock markets have outperformed other asset classes over the past 1 year, and especially more so over the last 6 months.

So, which are the NSE stocks which have outperformed the Nifty index.

The above chart indicates broadly the Blue Chips in the following sectors have been out – performing  the index : Auto, Cement, Banks, Pharma, FMCG. 

The blue chip stocks in the following sectors which have underperformed and some have also given negative returns are : IT, Metals, Telecom. 

Are you invested in the markets? Because if not, you just missed a 45% (annualized) rally over the last 6 months. 

Happy Investing.

 

 

Bharti Infratel IPO – Analysis ~ P/E on higher side ~ No Comparables ~ Better to wait

Bharti Infratel IPO Analysis, Stocks Analysis, Investing, Listing, INdian Stocks IPO, Upcoming Stocks

Bharti Infratel is coming out with a 100% book building, initial public issue of 188,900,000 equity shares of Rs 10 each, in a price band Rs 210-240 per equity share.

Up to 50% of the issue will be allocated to Qualified Institutional Buyer (QIBs) including 5% to mutual funds, further 15% to non-institutional bidders and the remaining 35% for the retail investors.

The issue will open for subscription on December 10, 2012 and will close on December 14, 2012.

Bharti Infratel along with Indus (a joint venture with Vodafone India and Idea Cellular) is one of the largest tower infrastructure providers in India, based on the number of towers that Bharti Infratel owns and operates and the number of towers owned or operated by Indus. Having a nationwide presence with operations in all 22 telecommunications Circles in India.

The telecom tower business largely depends on telecom operators. Bharti Infratel and Indus have MSAs with the leading wireless telecommunications service providers in India. With the number of telecom operators revenues affected due to the cancellation of 122 telecom licences in February this year, has resulted in a fall of about 30,000 tenants. But When the telecom services sector does well, then the tower sector also does well, but when the services part is not doing well, the tower sector is largely still assured of its revenues due to long-term contracts.

However, the company’s business is highly dependent on factors affecting the wireless telecommunications industry in India, particular the growth of their key customers.

Further the tower infrastructure business in India is highly competitive in nature and apart from the established players like reliance Infratel the company faces competition from independent tower infrastructure companies including service providers such as GTL Infrastructure. Also the business is operations get affected by various regulatory measures with respect to tower sharing among wireless telecommunications service providers. There is another concern, Indus – a joint venture with Vodafone and Idea and operating a joint venture often requires additional organizational formalities as well as time-consuming procedures.

It is the first telecom tower company to enter the capital market and will be the biggest IPO since that of Coal India’s two years ago.

CRISIL has assigned IPO grade of ‘4/5’, indicating above average fundamentals to the Initial Public Offering of the company.

The issue comprises a fresh issue of 146,234,112 equity shares by the company, and an offer for sale of 42,665,888 equity shares by four of its shareholders, including Temasek and Goldman Sachs. The issue will constitute 10 per cent of the post-issue paid-up equity share capital of the company. Bharti Airtel, which owns about 86 per cent of Bharti Infratel, is not selling any shares but this issue will result in 10% equity dilution in the company and reduce Bharti Airtel’s stake in the subsidiary from 86.09% to 79.42%. The issue has been offered in a price band of Rs 210 -240 a share, based on the EPS of 4.31 for the Year Ended March 31, 2012 the P/E at the lower price band comes to 48.73x, while it comes at 55.68x, as there are no listed companies in India that engage in a business similar to that of the Company.

The issue proceeds will be used for setting up 4,813 new towers, at an estimated cost of Rs 1,087 crore, while up gradation and replacement of existing towers would require Rs 1,214 crore and green initiatives entail a cost of Rs 639 crore. The company is going for all modern methods and plans to reduce dependency on conventional fuel for powering its towers by switching to renewable energy sources at several remote locations.

The issue appears overpriced, at these levels. However, there are no comparables and though there was a lull in the business after the cancellation of 122 telecom licenses early this year, but with refarming and fresh auction of spectrum, and more clarity in policy, investments are likely to return to the sector after battling regulatory uncertainty and weak investor sentiment for more than a year.

Investors can wait for the listing to happen and see how the market reacts, and if possible get the stock at a discount.

The financials are given below (in Rs Millions)

Particulars Mar 2012 Mar 2011 Mar 2010 Mar 2009
Net Sales 41581.60 28408.77 24530.30 26241.66
Total Income 42692.20 29298.13 29297.77 28662.74
PBIDT 17478.20 19531.89 17417.72 16383.11
PBT 6839.80 4895.32 3208.19 4374.42
PAT 4474.40 3481.90 2054.95 2963.38
Reserves 140303.40 132532.58 130199.12 98854.82
Net Worth 146111.40 138340.61 136007.15 104259.82
Total Debt 0.60 0.00 6000.00 41341.25
ROCE 4.79 3.74 2.68 3.46
RONW 3.15 2.54 1.71 2.87
PATM(%) 10.76 12.26 8.38 11.29
CPM(%) 36.32 62.51 63.64 55.27
CEPS 26.00 30.57 26.88 26.84

CARE (Credit Analysis & Research) IPO Analysis

CARE (Credit Analysis & Research) IPO Analysis , Review, Stocks, Investments, Indian Stock Markets,

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore.

The issue opens on Dec 07 2012 and closes on Dec 11 2012.

Credit Analysis & Research (CARE) is a second largest full service credit rating company in India, offering rating and grading services across a diverse range of instruments and industries including IPO grading, equity grading, and grading of various types of enterprises, including shipyards, maritime training institutes, construction companies and rating of real estate projects, among others.

The company with over 19 years of experience in rating debt instruments and related obligations covering a wide range of sectors, has rating relationships with 4,644 clients. CARE’s established presence in rating debt instruments and bank loans and facilities, domain experience across a range of sectors such as manufacturing, services, banks and infrastructure, strong rating credibility and brand presence along with strong financial position and profitability are its major strength.

On the flip side, the company’s dependence on its rating services business could be considered risky. However, given its diversification plan involving several risks, may lead to losses or lower returns from such activities. Further, migration to internal rating based approach for credit risk could have negative impact on results of operations and revenues of the company. Moreover, given the financial services industry that the company operates in, it may also run high on the risk of retaining key personnel, along with the risk of its limited experience in markets outside India.

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore. The company will not be receiving any proceeds from the Offer, and all proceeds shall go to the Selling Shareholders. Based on the EPS of Rs 40.52 for the year ended March 31, 2012, the P/E at the lower end of the Price Band comes at 17.28x and at the higher end of the Price Band it comes at 18.51x, while its competitors are ICRA and CRISIL trading at TTM PE multiple of 24.80x and 37.80x. The company is second largest rating agency in the country and has witnessed 40 per cent growth in profits and revenue in the last few years is having further plans of diversifying into new businesses along with increased global footprint.

The issue is attractive compared to it’s competitors as it is a debt free company and the rating business is expected to grow with more opportunities in offering alongwith the development of corporate bond market. It can be held in the portfolio for long term investment as well.

The financial performance of the companies over the past few years is given below (in Rs millions)

Particulars Mar 2011 Mar 2010 Mar 2009 Mar 2008
Net Sales 1708.69 1379.73 973.88 522.24
Total Income 1766.28 1537.97 1031.53 551.65
PBIDT 1362.20 1257.18 822.13 408.04
PBT 1340.10 1243.15 812.23 402.06
PAT 910.59 870.47 546.75 270.96
Reserves 2929.02 2090.33 1269.90 759.92
Net Worth 3024.20 2185.51 1347.65 837.67
Total Debt 0.00 0.00 0.00 0.00
ROCE 51.45 69.90 73.23 55.20
RONW 34.96 49.27 50.04 37.50
PATM(%) 53.29 63.09 56.14 51.88
CPM(%) 54.59 64.11 57.16 53.03
CEPS 97.99 92.93 71.59 35.62

Taxation (2012-2013) on Mutual Fund Schemes ~ Snapshot

.
.
The Tax Maze never ceases to amaze. There are various options available to investors in equity, debt etc. And each type of investment is taxed differently according to the residential status, period of holding, type of investment & tax bracket.

Here is a snapshot of the taxation (2012-2013) on Mutual Fund Schemes in India. This if of help in understanding the tax implications and judiciously allocating funds across assets.

Dividend
Resident Individual/HUF Domestic Corporates NRI**
Equity Oriented Schemes Tax Free Tax Free Tax Free
Other than Equity Oriented Schemes Tax Free Tax Free Tax Free

 

Dividend Distribution Tax (Payable by the Scheme)
Resident Individual/HUF Domestic Corporates NRI**
Equity Oriented Schemes* Nil Nil Nil
Other than Equity Oriented Schemes 12.5%+ 5% Surcharge+ 3% Cess 30%+ 5% Surcharge+ 3% Cess 12.5%+ 5% Surcharge+ 3% Cess
13.519% 32.445% 13.519%
Money Market & Liquid Schemes 25%+ 5% Surcharge+ 3% Cess 30%+ 5% Surcharge+ 3% Cess 25%+ 5% Surcharge+ 3% Cess
27.0375% 32.445% 27.0375%

 

Long Term Capital Gains (Units held for more than 12 months)
Resident Individual/HUF Domestic Corporates NRI**
Equity Oriented Schemes* Nil Nil Nil
Other than Equity Oriented Schemes 12.5%+ 5% Surcharge+ 3% Cess 30%+ 5% Surcharge+ 3% Cess 12.5%+ 5% Surcharge+ 3% Cess
13.519% 32.445% 13.519%
Money Market & Liquid Schemes 25%+ 5% Surcharge+ 3% Cess 30%+ 5% Surcharge+ 3% Cess 25%+ 5% Surcharge+ 3% Cess
27.0375% 32.445% 27.0375%

 

Short Term Capital Gains (Units held for 12 months or less)
Resident Individual/HUF Domestic Corporates NRI**
Equity Oriented Schemes* 15% + 3% Cess 15% +5% Surcharge # + 3% Cess 15% + 3% Cess
15.45% 16.223% 15.45%
Other than Equity Oriented Schemes 30%^ + 3% Cess 30% +5% Surcharge # + 3% Cess 30%^ + 3% Cess
30.9% 32.445% 30.9%

^Assuming the investor falls into the highest tax bracket
# The total income of the corporate would exceed Rs. 1 Crore

Tax deducted at source pertaining to NRI Investors$
Short Term Capital Gain Long Term Capital Gain
Equity Oriented Schemes 15.450% ## Nil
Other than Equity Oriented schemes (Listed) 30.90% 20.60%@
Other than Equity Oriented schemes (Unlisted) 30.90% 10.30%

*STT @ 0.25% will be deducted on equity oriented schemes at the time of redemption and switch to the other schemes.
Mutual Fund would also pay securities transaction tax wherever applicable on the securities bought/sold
** The tax rates are subject to DTAA benefits available to NRI’s. As per the Finance Act, 2012, submission of tax residency certificate containing prescribed particulars, will be a necessary (though not sufficient) condition for granting DTAA benefits to non-residents
*** These are the tax rates applicable to capital gains, in case the rate of tax is lower than 20% and if the NRI does not have a Permanent Account Number, then for the purpose of TDS, the withholding tax rate would be 20%
## Subject to NRI’s having Permanent Account Number in India
$ As per the Finance Act 2012, with effect from July 1, 2012, a list of transactions is proposed to be specified, wherein the rate for tax deduction at source needs to be determined by the assessing officer. In case the transaction of sale of mutual fund units by an NRI gets covered within such list, then an application would be required to be made to the assessing officer to determine the tax deduction at source rate
$$ As per the Finance Act, 2012, in case of transfer of unlisted securities by non-resident, the tax rates in case of long term capital gains shall be 10% (plus surcharge and cess) without indexation
@ after providing for indexation

The information  is for general purposes only. Please consult your financial advisor before making any investment decisions.

November 2012

Tara Jewels IPO Analysis

Tara Jewels IPO Analysis, Buy, Subscribe, Indian Jewelry Stocks, Gitanjali Jems, Rajesh Exports, Gold, .

Tara Jewels Limited is coming out with a 100% book building; initial public offering (IPO) of 79,77,778 equity shares of Rs 10 each in a price band Rs 225-230 per equity share. The issue will open on November 21, 2012 and will close on November 23, 2012.

  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
  • The issue opens for subscription on November 21, 2012 and closes on November 23, 2012.
  • The shares will be listed on BSE as well as NSE.
  • The face value of the share is Rs 10 and is priced 22.50 times of its face value on the lower side and 23.00 times on the higher side.
  • Book running lead managers to the issue are Enam Securities and ICICI Securities.
  • Compliance Officer for the issue is Amol Raje.

Profile of the company

Tara Jewels is an integrated player in the jewellery industry with experience ranging from designing to retailing of jewellery. It is conferred with the status of a Star Trading House by the Ministry of Commerce & Industry, Government of India and have been the highest exporter in gems and jewellery sector for the years 2008-2009 and 2009-2010. The company’s business can be divided into three operations namely, manufacturing, exporting and retailing. Its portfolio of products includes gold, platinum, honeydium, pristinium and silver jewellery with or without studded precious and semi-precious stones. The products have presence across different price points and cater to customers across high-end, mid-market and value market segments.

The company has four manufacturing units, of which one is located in Panyu, China. The other three units are located in Mumbai out of which two units are situated in SEEPZ and one in MIDC. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010 the company has achieved an aggregate production of 554.77 kgs, 10,616.40 kgs, 4,753.25 kgs and 2,562.91 kgs of jewellery, respectively. The manufacturing units are spread over an area of 84,584 square feet employing 35 designers and 955 craftsmen, as on September 30, 2012.

It exports studded jewellery which is manufactured by it and by third party manufacturers. The company exports studded jewellery to jewellery chains including Christ Uhrean and Schmuck and retailers including Walmart. Tara Jewels primarily export to Australia, China, Canada, European Union, South Africa, UAE, UK and USA. In the European Union, the company export to 12 countries including Austria, Germany and Switzerland. The company’s income from export operations has grown at a CAGR of 19.77% from Fiscal 2010 to Fiscal 2012. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010, the income from export operations constitutes 78.82%, 80.90%, 80.99% and 97.59% of the company’s total income, respectively.

IPO Grading

CARE has assigned an ‘IPO Grade 3’, indicating average fundamentals, to the initial public issue of the company.

Proceeds is being used

  • To meet the expenses of establishing retail stores
  • For repayment or prepayment of loans; and
  • For general corporate purposes

Industry Overview

US is the world’s largest market for jewellery followed by China, India and the Middle East and in Europe, the UK and Italy are the largest consumers. (more…)

What are Fixed Maturity Plans (FMP’s) ~ Advantages & Disadvantages

.Fixed Maturity Plans (FMP's) ,Advantages , Disadvantages, Debt Mutual Funds, Indexation Benefits,

I Came across this note in Economic times about FMP’s and have reproduced it here. It gives a fair idea about FMP’s in general and the advantages/disadvantages of investing in them along with Indexation benefits. There are some obvious benefits of investing in FMP’s over FD’s in terms of post tax returns using the indexation benefits. Investing towards the end of March gives double indexation benefits as well.

A fixed maturity plan (FMP) is a closed-ended debt scheme, wherein the duration of debt papers is aligned with the tenure of the scheme. So a one-year FMP will invest in debt instruments that mature in one year or just before this period.

This synchronized maturing completely eliminates the interest rate or reinvestment risk.

The FMPs invest largely in certificates of deposit (CDs), commercial papers (CPs), money market instruments, corporate bonds, even in bank fixed deposits. Though the yield of these wholesale debt papers is slightly higher than that of the retail FD rates, FMPs charge fund management fees and, therefore, the final return for investors is more or less close to the retail FD rates.

Advantages

So why should one consider the FMPs?

While such plans offer several advantages, the tax benefits stand out. Irrespective of the holding period, FMPs generate better post-tax yield. The length of the holding period matters, especially when one has to decide between growth and dividend options. Investors can go for the growth option if the holding period is more than a year, and for the dividend option if the holding period is less than a year.

Mutual fund investors have the option of paying capital gains tax at 10.3% (without indexation) or at 20.6% (with indexation). Indexation helps offer compensation against the rising inflation and, in this case, one is allowed to increase the value of initial investment as per the cost inflation index provided by the Income Tax Department. On the assumption that the inflation is 6%, the capital gain after indexation works out to just 4%. Since the 20.6% capital gains tax is paid only on 4%, the effective is lesser, taking the post-tax yield up to 9.18%.

As per the current law, investors can claim double indexation benefit if the holding period is over three financial years. Consider the case of a 375-day FMP, which starts on 26 March 2012 and matures on 5 April 2013. Since it is spread over three financial years-2011-12 (investing year), 2012-13 (holding year) and 2013-14 (redemption year)-the indexation will be for two years (6%+6%). In this case, one can report a 2% long-term capital loss (instead of gain) and it can be set off against other long-term capital gains reducing the tax liability further. One can come across several FMPs with double indexation benefits in March.

Disadvantages

Though FMPs offer several advantages, investors should also be aware of the drawbacks. Unlike the bank FDs, where one can opt for premature withdrawal by paying a small penalty, the exit from a fixed maturity plan is very difficult. Though these units are listed on the stock exchanges, most counters are virtually illiquid. Even if random trade takes place, it is usually at a discount to the NAVs. So investors should put in only the money they don’t need till the maturity of FMPs.

Though the FMPs are relatively less risky, investors should not treat these as dream products that offer high return with zero risk. While the structure eliminates interest rate and reinvestment risk, the credit risk (or the default risk) still exists. Since the fund houses are not allowed to give ‘indicative portfolios’, there is no mechanism to make sure that the money will be invested only in high quality papers. While bank FDs come with deposit insurance (for a holding of up to Rs 1 lakh), a similar facility is not available for FMPs. So one should only opt for reputed fund houses. ~ Source ET

Read & become aware about Debt Funds & indexation Benefits.

The Illusion of prediction ~ Hindsight Bias

The Illusion of prediction , Hindsight Bias, Financial Pundits, Predicting the stock markets, Stock trends

Everything makes sense in hindsight, a fact that financial pundits exploit every evening as they offer convincing accounts of the day’s events.  

And this Illusion that we understand the past fosters overconfidence in our ability to  predict the future. The idea that the future is unpredictable is undermined every day by the ease with which the past is explained. This is especially true in the financial markets.

Value Investing

Quick Snapshot of Sensex Companies ~ TTM EPS & PE Ratios

 
Market Data
Company
Nov 09 Price(Rs)
FV
EPS (Rs)
PE(x)
 
 
 
BHEL
232.30
2.00
28.63
8.11
Bajaj Auto
1852.05
10.00
104.58
17.71
Bharti Airtel
275.30
5.00
16.46
16.72
Cipla
393.50
2.00
18.21
21.60
Coal India
346.25
10.00
13.01
26.61
Dr Reddys Lab
1768.30
5.00
50.67
34.90
GAIL India
355.50
10.00
29.12
12.21
HDFC
794.00
2.00
28.96
27.42
HDFC Bank
639.30
2.00
24.79
25.79
Hero MotoCorp
1907.60
2.00
113.81
16.76
Hindalco
113.30
1.00
9.79
11.57
Hindustan Unilever
529.80
1.00
16.55
32.01
ICICI Bank
1059.20
10.00
64.19
16.50
ITC
288.50
1.00
8.59
33.59
Infosys
2349.15
5.00
156.50
15.01
Jindal Steel & Power
382.45
1.00
19.68
19.44
Larsen & Toubro
1620.95
2.00
79.03
20.51
Mahindra & Mahindra
910.30
5.00
51.53
17.66
Maruti Suzuki
1464.65
5.00
51.80
28.27
NTPC
166.95
10.00
12.57
13.28
ONGC
257.10
5.00
28.47
9.03
Reliance Industries
788.60
10.00
57.29
13.76
SBI
2156.35
10.00
219.40
9.83
Sterlite Inds. (I)
100.30
1.00
3.33
30.08
Sun Pharma Inds.
694.50
1.00
16.71
41.56
TCS
1325.50
1.00
62.57
21.18
Tata Motors
280.65
2.00
6.69
41.95
Tata Power
101.20
1.00
4.99
20.29
Tata Steel
390.55
10.00
58.58
6.67
Wipro
370.60
2.00
21.50
17.24
 
Sensex TTM PE stands at ~20.  ~ Data Source Ace Equity
 
 

October 2012

Cost of Inflation Index AY 2012-13 ~ Long term Capital Gains ~ Double Indexation

Double Indexation, FMP, Cost of Inflation Index AY 2012-13 ,To compute Long term Capital Gains Indexation, AY 2012-13, Tax Planning, Fixed Maturity Plans, Debt Funds Taxation, Real Estate Capital Gains
COST INFLATION INDEX TABLE – FINANCIAL YEAR 1981-82 ONWARDS:
Assessment Year (AY)
Financial Year (FY)
Cost Inflation Index (CII)
2014-15
2013-14
2013-14
2012-13
852
2012-13
2011-12
785
2011-12
2010-11
711
2010-11
2009-10
632
2009-10
2008-09
582
2008-09
2007-08
551
2007-08
2006-07
519
2006-07
2005-06
497
2005-06
2004-05
480
2004-05
2003-04
463
2003-04
2002-03
447
2002-03
2001-02
426
2001-02
2000-01
406
2000-01
1999-2000
389
1999-2000
1998-99
351
1998-99
1997-98
331
1997-98
1996-97
305
1996-97
1995-96
281
1995-96
1994-95
259
1994-95
1993-94
244
1993-94
1992-93
223
1992-93
1991-92
199
1991-92
1990-91
182
1990-91
1989-90
172
1989-90
1988-89
161
1988-89
1987-88
150
1987-88
1986-87
140
1986-87
1985-86
133
1985-86
1984-85
125
1984-85
1983-84
116
1983-84
1982-83
109
1982-83
1981-82
100

The cost of inflation index is useful for income-tax assesses in the computation of tax on long-term capital gains (for indexation purposes). In the previous two years, the cost inflation index rose 10 per cent and 12.5 per cent, respectively.

A cost inflation index helps reduce the inflationary gains, thereby reducing the long-term capital gains tax payout for the taxpayer. Currently, the income-tax law allows long-term capital gains to be computed after adjusting for inflation (Debt Mutual Funds, FMP’s, Real Estate Gains etc.) .

The cost of acquisition as well as the cost of improvement is adjusted for inflation between the date of purchase and date of sale (through the cost inflation index) before the long-term capital gain is ascertained. (~ The Hindu)

Assume, if the investor invested Rs 1,00,000 in the growth option on March 30, 2009 and redeemed the investment on April 2, 2010 for Rs 1,10,000 

The investment happened in financial year 2008-09, for which the government has declared cost inflation index of 582.

The investor redeemed the investment in financial year in 2010-11, for which the cost inflation index is 711.

The capital gains is Rs. 110,000 minus Rs. 100,000 i.e. Rs. 10,000.

The holding period is 367 days, which is more than 1 year. Therefore, it is a long term capital gain.

The maximum tax the investor has to bear is 10% (plus surcharge plus education cess) on the capital gain of Rs. 10,000. Thus, the maximum tax payable would be Rs. 1,000 (plus surcharge plus education cess).

Investor can benefit from indexation. The indexed cost of acquisition is Rs. 100,000 X 711 ÷ 582 i.e. Rs. 122,165. This is higher than the selling price of Rs. 110,000. Thus, the investor ends up with a long term capital loss of Rs. 12, 165. This can be set off against long term capital gains, as discussed in the next section.

Another point to note is that although the investor held the investment for slightly more than a year, the investor gets the benefit of indexation for two years viz. 2009-10 and 2010-11. Hence the name “double indexation” for such structures.

Mutual funds tend to come out with fixed maturity plans towards the end of every financial year to help them benefit from such double indexation. 

Largely investors are unaware about this benefit. This benefit can and should be taken by investing towards the end of a financial year, if the investor has surplus funds, because the capital gains virtually becomes tax free due to the double indexation benefit.

What are debt funds ~ Know more about this important asset class

What are debt funds , Yield spread, Interest rate risk, Credit risk, Asset allocation, Mutual funds, How to invest in debt funds, Liquid Funds, FMP, Short term debt, Long term debt, Corporate Bonds

 

Many investors are ignorant of the advantages of investing debt funds investment avenue as an asset class. They prefer to keep funds in FD’s and other traditional debt instruments like PPF/KVP’s/NSC/Post Office etc ~ primarily due to lack of knowledge.

This post will throw some light on the different kinds of debt funds and how they work.

Investment in a debt security,  entails a return in the form of interest (at a pre-specified frequency for a pre- specified period), and refund of a pre-specified amount at the end of the pre-specified period.

The pre-specified period is also called tenor. At the end of the tenor, the securities are said to mature. The process of repaying the amounts due on maturity is called redemption.

Debt securities that are to mature within a year are called money market securities.

The return that an investor earns or is likely to earn on a debt security is called its yield. The yield would be a combination of interest paid by the issuer and capital gain (if the proceeds on redemption are higher than the amount invested) or capital loss (if the proceeds on redemption are lower than the amount invested)

Debt securities may be issued by Central Government, State Governments, Banks, Financial Institutions, Public Sector Undertakings (PSU), Private Companies, Municipalities etc.

  • Securities issued by the Government are called Government Securities or G-Sec or Gilt.
  • Treasury Bills are short term debt instruments issued by the Reserve Bank of India on behalf of the Government of India.
  • Certificates of Deposit are issued by Banks (for 91 days to 1 year) or Financial Institutions (for 1 to 3 years)
  • Commercial Papers are short term securities (upto 1 year) issued by companies.
  • Bonds / Debentures are generally issued for tenors beyond a year. Governments and public sector companies tend to issue bonds, while private sector companies issue debentures.

    Since the government is unlikely to default on its obligations, Gilts are viewed as safe. The yield on Gilt is generally the lowest in the market. Since non-Government issuers can default, they tend to offer higher yields. The difference between the yield on Gilt and the yield on a non-Government Debt security is called its yield spread.

The possibility of a non-government issuer defaulting on a debt security i.e. its credit risk, is measured by Credit Rating companies like CRISIL, ICRA, CARE and Fitch. They assign different symbols to indicate the credit risk in a debt security. For instance ‘AAA’ is CRISIL’s indicator of highest safety in a debenture. Higher the credit risk, higher is likely to be the yield on the debt security.

The interest rate payable on a debt security may be specified as a fixed rate, say 6%. Alternatively, it may be a floating rate i.e. a rate linked to some other rate that may be prevailing in the market, say the rate that is applicable to Gilt. Interest rates on floating rate securities (also called floaters) are specified as a “Base + Spread”. For example, 5-year G-Sec + 2%. This means that the interest rate that is payable on the debt security would be 2% above whatever is the rate prevailing in the market for Government Securities of 5-year maturity.

The returns in a debt portfolio are largely driven by interest rates and yield spreads.

Interest Rates

Suppose an investor has invested in a debt security that yields a return of 8%. Subsequently, yields in the market for similar securities rise to 9%. It stands to reason that the security, which was bought at 8% yield, is no longer such an attractive investment.

It will therefore lose value. Conversely, if the yields in the market go down, the debt security will gain value. Thus, there is an inverse relationship between yields and value of such debt securities which offer a fixed rate of interest.

A security of longer maturity would fluctuate a lot more, as compared to short tenor securities. Debt analysts work with a related concept called modified duration to assess how much a debt security is likely to fluctuate in response to changes in interest rates.

In a floater, when yields in the market go up, the issuer pays higher interest; lower interest is paid, when yields in the market go down. Since the interest rate itself keeps adjusting in line with the market, these floating rate debt securities tend to hold their value, despite changes in yield in the debt market.

If the portfolio manager expects interest rates to rise, then the portfolio is switched towards a higher proportion of floating rate instruments; or fixed rate instruments of shorter tenor. On the other hand, if the expectation is that interest rates would fall, then the manager increases the exposure to longer term fixed rate debt securities.

The calls that a fund manager takes on likely interest rate scenario are therefore a key determinant of the returns in a debt fund – unlike equity, where the calls on sectors and stocks are important.

Yield Spreads

Suppose an investor has invested in the debt security of a company. Subsequently, its credit rating improves. The market will now be prepared to accept a lower yield spread. Correspondingly, the value of the debt security will increase in the market.

A debt portfolio manager explores opportunities to earn gains by anticipating changes in credit quality, and changes in yield spreads between different market benchmarks in the market place. (~ source:NISM)

Remember that Debt funds are more tax efficient that FD’s. You can read about taxation on Capital Gains on debt Mutual Funds here.

Be aware of this asset class and use it to judiciously optimize your asset allocation towards reaching your financial goals. 

This article – Guide to debt funds & article – Debt funds can prove beneficial from Economic times further articulates the tax advantages & other benefits of investing in debt funds. 

Measures of Risk ~ Equity & Debt

.

Measures of Risk, Performance, Mutual Funds , Stocks, Standard Deviation, Variance, Beta, Modified duration, Credit Risk, Interest Rate Risk, Weighted Average Maturity  ,Yield Spread,

Investors generally focus on the returns of any asset. They largely ignore the risk factors and most importantly are ignorant of the measures of risk. 

And so, the real Risk comes from not knowing what they are doing ~ Warren Buffett

This post talks about the measures of risks in equities & debt. The awareness of the measures of risk is extremely helpful in designing a comprehensive financial plan, investing, asset allocation etc.

Fluctuation in returns is used as a measure of risk.

Therefore, to measure risk, generally the periodic returns (daily / weekly / fortnightly / monthly) are first worked out, and then their fluctuation is measured.

The fluctuation in returns can be assessed in relation to itself, or in relation to some other index. Accordingly, the following risk measures are commonly used.

Variance

Suppose there were two stocks, with monthly returns as follows: Stock 1: 5%, 4%, 5%, 6%. Average=5%  & Stock 2: 5%, -10%, +20%, 5% Average=5%

Although both stocks have the same average returns, the periodic (monthly) returns fluctuate a lot more for Stock 2. Variance measures the fluctuation in periodic returns of a asset, as compared to its own average return. This can be easily calculated in MS Excel using the following function:

=var(range of cells where the periodic returns are calculated)

Variance as a measure of risk is relevant for both debt and equity.

Standard Deviation

Like Variance, Standard Deviation too measures the fluctuation in periodic returns of a scheme in relation to its own average return. Mathematically, standard deviation is equal to the square root of variance.

This can be easily calculated in MS Excel using the following function: =stdev(range of cells where the periodic returns are calculated)

Standard deviation as a measure of risk is relevant for both debt and equity schemes.

Beta

Beta is based on the Capital Assets Pricing Model, which states that there are two kinds of risk in investing in equities – systematic risk and non-systematic risk.

Systematic risk is integral to investing in the market; it cannot be avoided. For example, risks arising out of inflation, interest rates, political risks etc.

Non-systematic risk is unique to a company; the non-systematic risk in an equity portfolio can be minimized by diversification across companies. For example, risk arising out of change in management, product obsolescence etc.

Since non-systematic risk can be diversified away, investors need to be compensated only for systematic risk. This is measured by its Beta.

Beta measures the fluctuation in periodic returns in a scheme, as compared to fluctuation in periodic returns of a diversified stock index over the same period.

The diversified stock index, by definition, has a Beta of 1. Companies or schemes, whose beta is more than 1, are seen as more risky than the market. Beta less than 1 is indicative of a company or scheme that is less risky than the market.

Beta as a measure of risk is relevant only for equity schemes.

Modified Duration

This measures the sensitivity of value of a debt security to changes in interest rates. Higher the modified duration, higher the interest sensitive risk in a debt portfolio.

The returns in a debt portfolio are largely driven by interest rates and yield spreads.

Interest Rates

Suppose an investor has invested in a debt security that yields a return of 8%. Subsequently, yields in the market for similar securities rise to 9%. It stands to reason that the security, which was bought at 8% yield, is no longer such an attractive investment.

It will therefore lose value. Conversely, if the yields in the market go down, the debt security will gain value. Thus, there is an inverse relationship between yields and value of such debt securities which offer a fixed rate of interest.

A security of longer maturity would fluctuate a lot more, as compared to short tenor securities. Debt analysts work with a related concept called modified duration to assess how much a debt security is likely to fluctuate in response to changes in interest rates.

In a floater, when yields in the market go up, the issuer pays higher interest; lower interest is paid, when yields in the market go down. Since the interest rate itself keeps adjusting in line with the market, these floating rate debt securities tend to hold their value, despite changes in yield in the debt market.

If the portfolio manager expects interest rates to rise, then the portfolio is switched towards a higher proportion of floating rate instruments; or fixed rate instruments of shorter tenor. On the other hand, if the expectation is that interest rates would fall, then the manager increases the exposure to longer term fixed rate debt securities.

The calls that a fund manager takes on likely interest rate scenario are therefore a key determinant of the returns in a debt fund – unlike equity, where the calls on sectors and stocks are important.

Yield Spreads

Suppose an investor has invested in the debt security of a company. Subsequently, its credit rating improves. The market will now be prepared to accept a lower yield spread. Correspondingly, the value of the debt security will increase in the market.

A debt portfolio manager explores opportunities to earn gains by anticipating changes in credit quality, and changes in yield spreads between different market benchmarks in the market place.

Weighted Average Maturity

While modified duration captures interest sensitivity of a security better, it can be reasoned that longer the maturity of a debt security, higher would be its interest rate sensitivity. Extending the logic, weighted average maturity of debt securities in a scheme’s portfolio is indicative of the interest rate sensitivity of a scheme.

Being simpler to comprehend, weighted average maturity is widely used, especially in discussions with lay investors. However, a professional debt fund manager would rely on modified duration as a better measure of interest rate sensitivity. 

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