Can We Bank on the Sensex Boom?

By: Pravin Palande/ Forbes India

The Sensex is at a three-year high on the back of FII buying. Is this a sustainable trend, especially when IIP numbers are not encouraging? Forbes India asks the experts.

This is sustainable. FII buying surged due to the US Fed not tapering its QE and the US government shutdown. FIIs will not hesitate to invest in India for the foreseeable future. The US is not going to withdraw economic stimulus soon. The IIP numbers are not a worry since the RBI has stated it is projecting a GDP improvement.

The economy may not have seen its worst as yet, but it will remain attractive for FIIs. We need to worry about short-term volatilities that saw net selling of $3.7 billion in June-August. Partial withdrawal of QE, rise in current account and/or fiscal deficit, and political instability could cause temporary but heavy selling by FIIs.

With GDP growth below 5 percent, a widening CAD, weaker rupee and growing inflation, it is unlikely the market can sustain high levels. The only way these levels can stay firm or the index can rise is if the macro data starts improving. This would require policy initiatives, or a change of guard at the Centre.

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Favourable 'partial ruling' in spat with Cooper: Apollo

Nov 09, 2013, 12.07 PM IST

In October, Cooper filed a complaint in Delaware Court of Chancery to push for completion of their merger and stated that the Indian firm was seeking to delay an agreement with USW, which represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Arkansas.

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Favourable 'partial ruling' in spat with Cooper: Apollo

In October, Cooper filed a complaint in Delaware Court of Chancery to push for completion of their merger and stated that the Indian firm was seeking to delay an agreement with USW, which represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Arkansas.

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Favourable 'partial ruling' in spat with Cooper: Apollo

In October, Cooper filed a complaint in Delaware Court of Chancery to push for completion of their merger and stated that the Indian firm was seeking to delay an agreement with USW, which represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Arkansas.

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Apollo Tyres today said it has received a favourable 'partial ruling' from a US court in its dispute with Cooper Tire over their proposed USD 2.5-billion merger agreement and stated it is committed to finding a 'sensible way forward'.

"We are pleased that the Delaware Court has found that Apollo is not in breach of its merger agreement with Cooper Tire. Furthermore, the Court found that Apollo has used 'reasonable best efforts' to negotiate with the United Steelworkers (USW) and that, contrary to Cooper's claims, 'nothing in Apollo's conduct indicates buyer's remorse'," Apollo Tyres said in a statement.

Apollo continues to believe in the merits of the combination and is committed to finding a sensible way forward, it added.

In October, Cooper filed a complaint in Delaware Court of Chancery to push for completion of their merger and stated that the Indian firm was seeking to delay an agreement with USW, which represents Cooper employees at facilities in Findlay, Ohio, and Texarkana, Arkansas.

Apollo had denied this but sought price reduction in the USD 2.5-billion deal citing problems related to the US firm's operations in China and concessions to the workers' union but was rejected by Cooper.
Earlier this week, Cooper had said it has reached tentative agreements with USW aimed at helping it close the deal with Apollo.

In June, Apollo had announced to acquire Cooper Tire & Rubber Co in an all-cash transaction valued at around USD 2.5 billion (nearly Rs 14,500 crore) and the merged entity was billed to become the seventh largest tyre maker in the world.

Apollo Tyres stock price

On November 08, 2013, Apollo Tyres closed at Rs 71.60, down Rs 1.45, or 1.98 percent. The 52-week high of the share was Rs 101.50 and the 52-week low was Rs 54.60.

The company's trailing 12-month (TTM) EPS was at Rs 6.56 per share as per the quarter ended June 2013. The stock's price-to-earnings (P/E) ratio was 10.91. The latest book value of the company is Rs 46.24 per share. At current value, the price-to-book value of the company is 1.55.

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Next decade likely to belong to banking: Morgan Stanley

Pravin Palande/ Forbes India

It has been 20 years that morgan stanley began operations in India. During this time, India's GDP moved from $260 billion to $1,842 billion, and India's MSCI Index outperformed the emerging markets by 28 percent. Ridham Desai, managing director at Morgan Stanley, reflected on the past and talked about the next 10 years to Forbes India. Excerpts:

Will the return on equity for Indian companies fall in the coming decade?
The capital productivity for India has halved over the past five years. Projects are being delayed or not getting approved. India's investment rate is around 34 percent, but to generate 8 percent growth, our capital productivity has to increase. We need to bring down the incremental capital output ratio to 4.5—it is now at 8. Once this happens, higher growth should ideally translate to higher earnings. Between May 2003 and May 2008, the RoE for India was at 20 percent. Today it is 16 percent, taking us back to 1994-1997.

How have sectors moved over the past five years?
The past five years belonged to the consumer sector. This was driven by increasing public consumption, which spiked due to NREGA and other incentives.

How do you see the banking and finance sectors unfold over the next 10 years?
The credit/GDP ratio is 57 percent: This shows India is one of the most under-penetrated economies in the developing world. In the next 10 years, it is possible to take this number to 75 percent. Credit can grow at around 15 percent, underlining our belief that this is one segment that will continue to expand. Aadhar cards will reduce the cost of acquiring customers in rural areas by almost 80 percent. Further, there are more reforms expected in the banking sector.

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Nifty may trade between 6130-6230: Magnum Equity Broking

Magnum Equity Broking's Fundamental Report:

Indian market weakened for a third straight session on Thursday after Standard & Poor's said it may cut the country's sovereign rating if the next government fails to provide a credible plan to revive the economic growth.

The BSE Sensex closed down 0.35 percent at 20,822.77. The broader Nifty closed down 0.45 percent at 6,187.25. Indexes had earlier gained more than 1 percent, but started retreating after S&P reiterated its negative outlook on India's sovereign rating and put the onus on the new government to restore the country's growth and improve finances.

European equities closed flat on Thursday, despite initially rallying after the European Central Bank cut its main interest rate to 0.25 percent from 0.50 percent. US stocks declined sharply on Thursday, with the Dow Jones Industrial Average halting its record advance and Twitter's market debut drawing the spotlight, as investors reacted to an unexpected rate cut by the European Central Bank and a read on third-quarter US economic growth.

Global cues are subdued today with them SGX Nifty is showing 25 points cut in morning trade indicating that Indian market may open soft today and Nifty is expected to trade between 6230 and 6130 with downward biasness.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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GMM Pfaudler fixes record date for second interim dividend

Nov 08, 2013, 12.26 PM IST

GMM Pfaudler Ltd has informed that the record date for payment of second interim dividend, if any, is November 22, 2013.

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GMM Pfaudler fixes record date for second interim dividend

GMM Pfaudler Ltd has informed that the record date for payment of second interim dividend, if any, is November 22, 2013.

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GMM Pfaudler fixes record date for second interim dividend

GMM Pfaudler Ltd has informed that the record date for payment of second interim dividend, if any, is November 22, 2013.

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Fed may taper QE earlier than expected: HSBC

Nov 08, 2013, 12.29 PM IST

In an interview to CNBC-TV18, Leif Eskesen, Chief Economist for India and ASEAN at HSBC spoke about global economic factors.

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Fed may taper QE earlier than expected: HSBC

In an interview to CNBC-TV18, Leif Eskesen, Chief Economist for India and ASEAN at HSBC spoke about global economic factors.

Like this story, share it with millions of investors on M3

Fed may taper QE earlier than expected: HSBC

In an interview to CNBC-TV18, Leif Eskesen, Chief Economist for India and ASEAN at HSBC spoke about global economic factors.

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In an interview to CNBC-TV18, Leif Eskesen, Chief Economist for India and ASEAN at HSBC spoke about global economic factors.

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See upside in Tech Mahindra, says Baliga

Nov 07, 2013, 12.27 PM IST

Ambareesh Baliga of Edelweiss Financial Services is of the view that one may see decent upside in Tech Mahindra.

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See upside in Tech Mahindra, says Baliga

Ambareesh Baliga of Edelweiss Financial Services is of the view that one may see decent upside in Tech Mahindra.

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See upside in Tech Mahindra, says Baliga

Ambareesh Baliga of Edelweiss Financial Services is of the view that one may see decent upside in Tech Mahindra.

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Ambareesh Baliga of Edelweiss Financial Services told CNBC-TV18, " Tech Mahindra should surprise with much better results than what analysts are talking of and that is one stock where there is decent upside."

He further added, " Eicher Motors has been performing well over the past couple of years and that will continue to do well and Prestige Estates Projects is one of the few realty companies which should continue doing well. There is a difference between Bangalore based realty plays and other realty plays like Delhi and Mumbai. So, people should be looking at the Bangalore based ones especially Prestige is one of them."

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Do not buy MM, says Ajay Srivastava

Nov 07, 2013, 12.28 PM IST

Ajay Srivastava, CEO at Dimensions Consulting suggests not to buy Mahindra and Mahindra (M&M).

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Do not buy M&M, says Ajay Srivastava

Ajay Srivastava, CEO at Dimensions Consulting suggests not to buy Mahindra and Mahindra (M&M).

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Do not buy M&M, says Ajay Srivastava

Ajay Srivastava, CEO at Dimensions Consulting suggests not to buy Mahindra and Mahindra (M&M).

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Ajay Srivastava, CEO at Dimensions Consulting told CNBC-TV18, " Rallis India has already gone up quite a bit but I still think it has got way to go given the valuations. I don't have to buy on Escorts at all. It is too volatile. Promoter has been an issue for more than 20 years plus the liquidity of the stock is very poor and you cannot exit the stock when you want to. So I would certainly believe that Escorts should give good earnings but is a bad investment decision."

He further added, " Mahindra and Mahindra (M&M) sits on the borderline because tractors are doing well but its three other components are now struggling. The LCV is struggling, the car segment is struggling and the two-wheeler is also struggling. The aero investment, I don't know how far this has gone, so unfortunately for M&M, the three lemons versus one star is going to kind of counter balance it. So one cannot take a tractor company and invest in it because you don't have them as a standalone farm equipment kind of company barring Escorts where we have seen management issues and liquidity issues. So we are not recommending that anyone goes and buys that stock irrespective of what the financial performance comes out."

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Prefer ICICI Bank at around Rs 950: Ajay Srivastava

Ajay Srivastava, CEO at Dimensions Consulting told CNBC-TV18, "We have our investment at this point in Tata Motors . We have started to nibble into Larsen and Toubro (L&T) at this point of time."

"We haven't gone into the banking space by and large, we were investors in ICICI Bank. But it came back to Rs 950 or so, we will come back to invest in ICICI Bank because I think the value gap is tremendous in that company sometime or the other, the value gap is going to be breached giving us 40-50 percent returns. So these three stocks are what we are looking at," he added.

" M&M  - we are watching carefully as to how the performance pans out in the two-wheeler space and so on and at some point, we may come back to it. Rest of the stocks I think we are giving a go, buy at this point of time because they are either very richly valued or in a space that we don't want to invest in."

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All you wanted to know about liquid funds

Hemant Rustagi
Wiseinvest Advisors

Every mutual fund scheme has an investment objective that specifies what it aims to achieve for its investors. The investment objective of a liquid scheme is to provide investors an opportunity to earn returns through investments in debt & money market securities such as treasury bills, certificate of deposits and commercial papers, without compromising the liquidity.

To ensure high degree of liquidity as well as to minimize the volatility, liquid funds invest in securities that have a residual maturity of less than or equal to 91 days. Since liquid funds have a low level of risk, they are assigned blue colour as per codes specified by the SEBI.

Considering that liquid funds are ideally suited for investments that may be required to be redeemed at a short notice, most of the funds in this category do not have any exit load. Even those funds that have an exit load, usually charge a nominal load for investments redeemed within a week or so.

Although liquid funds are a safe option for investors from the point of view of volatility and risk of losing capital, it is important to invest in them for the right time horizon so that one doesn't suffer from opportunity loss.

For example, an investment in a liquid fund with a longer term horizon of say one year or more can result in an investor compromising his chances of earning higher returns through options such as short term income funds and FMPs.

Liquid funds score over traditional investment options like savings bank account and short term fixed deposits as they have the potential to provide higher returns.

However, one must choose the right option out of the ones offered by mutual funds like dividend payout, dividend re-investment and growth to enhance post tax returns.

It is important because being a debt fund by definition, a liquid fund is required to pay dividend distribution tax (DDT), before distributing dividends to investors. It is also important to mention here that most liquid funds offer only dividend reinvestment (daily, weekly and/or fortnightly) and growth option.

Some liquid funds do offer dividend payout options, but only for large investments on a weekly and fortnightly basis.

As per the current income tax laws, the DDT under the debt funds ( including liquid funds) for individual investors is 28.3250 percent ( 25 %+ 10% surcharge+3% cess).

However, for those who opt for growth option, short term capital gains i.e. capital gains earned out of investments sold within 12 months from the date of investment, are taxed at one's applicable rate of taxation.

For example, an investor in 10 percent slab has to pay short term capital gains taxes@ 10 percent. It is quite evident that a growth option would be much more tax efficient for him as compared to dividend payout or dividend re-investment.

However, for investors in the highest tax slab of 30 percent, opting for dividend reinvestment would be more tax efficient.

Liquid funds also score over bank deposits because mutual funds do not deduct tax at source (TDS). It makes the process a little less tedious for all those investors who opt for growth option. On the other hand, since the DDT is paid by the fund, dividend received in the hands of investors is tax free.

Investors have a number of liquid funds to choose from. From performance point of view, there is not much differentiation between them.

However, for those who may like to analyze the performance of liquid funds, the right way would be to compare the performance with that of the benchmark as well as the peer group i.e. other funds in the same category.

Liquid funds usually have Crisil's liquid fund index as the benchmark. Investors may have their own personal yardstick like the returns that they earn from savings bank account or short term FDs.

Despite having an edge over traditional investment options, the retail participation in liquid funds is still very low. That's because they find putting money into savings bank account much more convenient.

Besides, lack of awareness about liquid funds also makes investors vary of investing in these funds. Many investors tend to keep a sizeable balance in their savings bank accounts, and that too for prolonged periods.

It's time for them to turn their attention to short term investments too and embrace options like liquid funds to enhance returns. Remember, liquid funds can make a significant difference to what you get to keep in the end. 

The author is the CEO of Wiseinvest Advisors.

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