A Securities and Exchange Board of India proposal to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note route took the breath away of the Indian stock market and it suffered its biggest fall in history.
So what are these participatory notes? And why do they have this huge impact on the Indian securities markets?
P-Notes
Participatory Notes -- or P-Notes or PNs -- are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India.
Financial instruments used by hedge funds that are not registered with Sebi to invest in Indian securities. Indian-based brokerages to buy India-based securities / stocks and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.
Why P-Notes?
Since international access to the Indian capital market is limited to FIIs. The market has found a way to circumvent this by creating the device called participatory notes, which are said to account for half the $80 billion that stands to the credit of FIIs. Investing through P-Notes is very simple and hence very popular.
What are hedge funds?
Hedge funds, which invest through participatory notes, borrow money cheaply from Western markets and invest these funds into stocks in emerging markets. This gives them double benefit: a chance to make a killing in a stock market where stocks are on the rise; and a chance to make the most of the rising value of the local currency.
Who gets P-Notes?
P-Notes are issued to the real investors on the basis of stocks purchased by the FII. The registered FII looks after all the transactions, which appear as proprietary trades in its books. It is not obligatory for the FIIs to disclose their client details to the Sebi, unless asked specifically.
What is an FII?
An FII, or a foreign institutional investor, is an entity established to make investments in India.
However, these FIIs need to get registered with the Securities and Exchange Board of India. Entities or funds that are eligible to get registered as FII include pension funds; mutual funds; insurance companies / reinsurance companies; investment trusts; banks; international or multilateral organisation or an agency thereof or a foreign government agency or a foreign central bank; university funds; endowments (serving broader social objectives); foundations (serving broader social objectives); and charitable trusts / charitable societies.
The following entities proposing to invest on behalf of broad based funds, are also eligible to be registered as FIIs:
Asset Management Companies
Investment Manager/Advisor
Institutional Portfolio Managers
Trustees
How does Sebi regulate FIIs?
FIIs who issue/renew/cancel/redeem P-Notes, are required to report on a monthly basis. The report should reach the Sebi by the 7th day of the following month.
The FII merely investing/subscribing in/to the Participatory Notes -- or any such type of instruments/securities -- with underlying Indian market securities are required to report on quarterly basis (Jan-Mar, Apr-Jun, Jul-Sep and Oct-Dec).
FIIs who do not issue PNs but have trades/holds Indian securities during the reporting quarter (Jan-Mar, Apr-Jun, Jul-Sep and Oct-Dec) require to submit 'Nil' undertaking on a quarterly basis.
FIIs who do not issue PNs and do not have trades/ holdings in Indian securities during the reporting quarter. (Jan-Mar, Apr-Jun, Jul-Sep and Oct-Dec): No reports required for that reporting quarter.
Who can invest in P-Notes?
a) Any entity incorporated in a jurisdiction that requires filing of constitutional and/or other documents with a registrar of companies or comparable regulatory agency or body under the applicable companies legislation in that jurisdiction;
b) Any entity that is regulated, authorised or supervised by a central bank, such as the Bank of England, the Federal Reserve, the Hong Kong Monetary Authority, the Monetary Authority of Singapore or any other similar body provided that the entity must not only be authorised but also be regulated by the aforesaid regulatory bodies;
c) Any entity that is regulated, authorised or supervised by a securities or futures commission, such as the Financial Services Authority (UK), the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Securities and Futures Commission (Hong Kong or Taiwan), Australian Securities and Investments Commission (Australia) or other securities or futures authority or commission in any country , state or territory;
d) Any entity that is a member of securities or futures exchanges such as the New York Stock Exchange (Sub-account), London Stock Exchange (UK), Tokyo Stock Exchange (Japan), NASD (Sub-account) or other similar self-regulatory securities or futures authority or commission within any country, state or territory provided that the aforesaid organizations which are in the nature of self regulatory organizations are ultimately accountable to the respective securities / financial market regulators.
e) Any individual or entity (such as fund, trust, collective investment scheme, Investment Company or limited partnership) whose investment advisory function is managed by an entity satisfying the criteria of (a), (b), (c) or (d) above.
Sebi not happy
However, Indian regulators are not very happy about participatory notes because they have no way to know who owns the underlying securities. Regulators fear that hedge funds acting through participatory notes will cause economic volatility in India's exchanges.
Hedge funds were largely blamed for the sudden sharp falls in indices. Unlike FIIs, hedge funds are not directly registered with Sebi, but they can operate through sub-accounts with FIIs. These funds are also said to operate through the issuance of participatory notes.
30% FII money in stocks thru P-Notes
According to one estimate, more than 30 per cent of foreign institutional money coming into India is from hedge funds. This has led Sebi to keep a close watch on FII transactions, and especially hedge funds.
Hedge funds, which thrive on arbitrage opportunities, rarely hold a stock for a long time.
With a view to monitoring investments through participatory notes, Sebi had decided that FIIs must report details of these instruments along with the names of their holders.
Sebi Chairman M Damodaran has said that the proposals were against PNs but not against FIIs. The procedures for registering FIIs were in fact being simplified, he said.
Sebi has also proposed a ban on all PN issuances by sub-accounts of FIIs with immediate effect. They also will be required to wind up the current position over 18 months, during which period the capital markets regulator will review the position from time to time.
Sebi chairman M Damodaran, in a recent interview Business Standard, said that the amount of foreign investment coming in through participatory notes keeps changing and is somewhere between 25-30 per cent. "Recent indications are that it has gone up a little but again after the sub-prime crisis, there have been some exits. But it's a fairly significant percentage, it's not something you can ignore."
When asked if he was comfortable with almost one-fourth of the market being held by P-Notes, he said that he wasn't 'entirely uncomfortable.'
Wednesday, August 13, 2008
Sunday, April 6, 2008
Straddle and Strangle stretegy
What is Straddle?
An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.
Why it should be used?
An investor who is convinced a particular index will make a major directional move, but not sure whether up or down.
An investor who anticipates increased volatility in an index, up and/or down around its current level, and a concurrent increase in overlying options’ implied volatility.
An investor who would like to take advantage of the leverage that options can provide, and with a limited dollar risk.
Example :
Let’s assume the price is currently at $15 and we are currently in April 05. Suppose the price of the $15 call option for June 05 has a price of $2. The price of the $15 put option for June 05 has a price of $1. A straddle is achieved by buying both the call and the put for a total of $300: ($2 + $1) x 100 = 300. The investor in this situation will gain if the stock moves higher (because of the long call option) or if the stock goes lower (because of the long put option). Profits will be realized as long as the price of the stock moves by more than $3 per share in either direction. A strangle is used when the investor believes the stock has a better chance of moving in a certain direction, but would still like to be protected in the case of a negative move.
For example, let's say you believe the mining results will be positive, meaning you require less downside protection. Instead of buying the put option with the strike price of $15, maybe you should look at buying the $12.50 strike that has a price of $0.25. In this case, buying this put option will lower the cost of the strategy and will also require less of an upward move for you to break even. Using the put option in this strangle will still protect the extreme downside, while putting you, the investor, in a better position to gain from a positive announcement.
Strangle
An options strategy where the investor holds a position in both a call and put with different strike prices but with the same maturity and underlying asset. This option strategy is profitable only if there are large movements in the price of the underlying asset.
This is a good strategy if you think there will be a large price movement in the near future but are unsure of which way that price movement will be.
The strategy involves buying an out-of-the-money call and an out-of-the-money put option. A strangle is generally less expensive than a straddle as the contracts are purchased out of the money.
An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.
Why it should be used?
An investor who is convinced a particular index will make a major directional move, but not sure whether up or down.
An investor who anticipates increased volatility in an index, up and/or down around its current level, and a concurrent increase in overlying options’ implied volatility.
An investor who would like to take advantage of the leverage that options can provide, and with a limited dollar risk.
Example :
Let’s assume the price is currently at $15 and we are currently in April 05. Suppose the price of the $15 call option for June 05 has a price of $2. The price of the $15 put option for June 05 has a price of $1. A straddle is achieved by buying both the call and the put for a total of $300: ($2 + $1) x 100 = 300. The investor in this situation will gain if the stock moves higher (because of the long call option) or if the stock goes lower (because of the long put option). Profits will be realized as long as the price of the stock moves by more than $3 per share in either direction. A strangle is used when the investor believes the stock has a better chance of moving in a certain direction, but would still like to be protected in the case of a negative move.
For example, let's say you believe the mining results will be positive, meaning you require less downside protection. Instead of buying the put option with the strike price of $15, maybe you should look at buying the $12.50 strike that has a price of $0.25. In this case, buying this put option will lower the cost of the strategy and will also require less of an upward move for you to break even. Using the put option in this strangle will still protect the extreme downside, while putting you, the investor, in a better position to gain from a positive announcement.
Strangle
An options strategy where the investor holds a position in both a call and put with different strike prices but with the same maturity and underlying asset. This option strategy is profitable only if there are large movements in the price of the underlying asset.
This is a good strategy if you think there will be a large price movement in the near future but are unsure of which way that price movement will be.
The strategy involves buying an out-of-the-money call and an out-of-the-money put option. A strangle is generally less expensive than a straddle as the contracts are purchased out of the money.
Tuesday, February 5, 2008
Effect of treasury stock
Picked up from one blog.... to keep in in my notes when i wanted to go through it.. i have not done analysis..
After reading an article in Business week (online dated Jul-2/2007) about the top 100 tech companies ranked by ROE and discovering Accenture’s ROE as 66%. I calculated its ROE for the last five years (as of Aug-31 for the corresponding year). To my surprise I found that the ROE has reduced over the period of 5 years. It was at an astonishing high level of 131% on Aug-31/2002. Following table gives a snapshot of some important numbers pertaining to its ROE for last five years.
In millions
2006 2005 2004 2003 2002
Book value $1,890 $1,690 $1,470 $831 $438
Net sales $18,200 $17,090 $15,110 $13,390 $13,100
Net income before minority interest $1,430 $1,500 $1,220 $1,040 $576
Minority interest $460 $568 $532 $549 $332
Net income $973 $940 $691 $498 $245
ROE (net income) 51.48% 55.62% 47.01% 59.93% 55.94%
ROE (net income before minority interest) 75.66% 88.76% 82.99% 125.15% 131.51%
The reason I have calculated two ROEs is to demonstrate the effect of dual share class that has given rise to minority interest , as this amount is significant so it distorts the net income. This is evident from the fact that the ROE calculated by considering net income before minority interest varies from 75% to 131%. Whereas the other ROE (calculated just from net income) varies from 51% to 55%.
NOTE : Return on equity (ROE) is defined as (net income / shareholder’s equity)
A close look at the different components of book value reveals the following:
In millions
2006 2005 2004 2003 2002
Class 'A' common shares $14.00 $13.00 $13.00 $10.00 $10.00
Class 'X' common shares $6.00 $7.00 $9.00 $11.00 $13.00
Restricted share units (related to Class 'A' shares) $482,289.00 $365,708.00 $475,240.00 $669,860.00 $848,218.00
Deferred compensation $0.00 $0.00 -$150,777.00 -$112,251.00 $0.00
Additional paid in capital $701,006.00 $1,365,013.00 $1,643,652.00 $1,501,136.00 $1,397,828.00
Treasury shares -$869,957.00 -$763,682.00 -$132,313.00 -$88,198.00 -$315,486.00
Treasury shares owned by Accenture ltd share employee compensation trust $0.00 $0.00 -$296,894.00 -$308,878.00 -$221,110.00
Retained earnings $1,607,391.00 $962,339.00 $46,636.00 -$641,915.00 -$1,190,415.00
Accumulated other comprehensive loss -$26,494.00 -$232,484.00 -$113,760.00 -$188,233.00 -$80,432.00
SHAREHOLDER'S EQUITY $1,894,255.00 $1,696,914.00 $1,471,806.00 $831,542.00 $438,626.00
From the above table three things are clear :
1. The high ROE in 2002 was because of a large deficit in retained earnings that in turn reduced the book value. This started in the year 2001 ($1.43bn deficit) when the company broke from its traditional partnership type organization and became public. It can be seen that this got reduced in subsequent years and in 2006 was $1.6 bn
2. Additional paid in capital has decreased since 2002 and treasury stock has increased since then. Both together have decreased the book value.
3. As the company’s Net income before minority interest grows and its effect of minority interest gets reduced so the difference between two ROEs will also get reduced.
EFFECT OF TREASURY SHARES cost of shares in millions
Year Treasury shares COST
2002 12.5mn -$315,486
2003 5.2mn -$88,198
2004 6 mn -$132,313
2005 32mn -$763,682
2006 36mn -$869,957
Above fig shows the amount of treasury shares held by the company. It can be seen that the figure has been changing every year. As a conservative estimate let us assume that the number of treasury shares would have remained 6mn on Aug-31,2006 instead of 36 mn. The amount against treasury shares would have reduced from 869 mn to 144 mn. This would have increased the book value at least by 725mn. Thus making the book value around $2.6 bn. Making the two ROEs as 37% and 53% (ROE with net income before minority interest) instead of the present 51% and 75%.
CONCLUSION : So if you are comparing Accenture to its competitors and are impressed by its ROE then you might want to look at the details of its competitors’ book value and make sue you are comparing apples to apples.
Posted by Dayanand Menashi at Monday, June 25, 2007
Labels: Analysis of Accenture's stock
After reading an article in Business week (online dated Jul-2/2007) about the top 100 tech companies ranked by ROE and discovering Accenture’s ROE as 66%. I calculated its ROE for the last five years (as of Aug-31 for the corresponding year). To my surprise I found that the ROE has reduced over the period of 5 years. It was at an astonishing high level of 131% on Aug-31/2002. Following table gives a snapshot of some important numbers pertaining to its ROE for last five years.
In millions
2006 2005 2004 2003 2002
Book value $1,890 $1,690 $1,470 $831 $438
Net sales $18,200 $17,090 $15,110 $13,390 $13,100
Net income before minority interest $1,430 $1,500 $1,220 $1,040 $576
Minority interest $460 $568 $532 $549 $332
Net income $973 $940 $691 $498 $245
ROE (net income) 51.48% 55.62% 47.01% 59.93% 55.94%
ROE (net income before minority interest) 75.66% 88.76% 82.99% 125.15% 131.51%
The reason I have calculated two ROEs is to demonstrate the effect of dual share class that has given rise to minority interest , as this amount is significant so it distorts the net income. This is evident from the fact that the ROE calculated by considering net income before minority interest varies from 75% to 131%. Whereas the other ROE (calculated just from net income) varies from 51% to 55%.
NOTE : Return on equity (ROE) is defined as (net income / shareholder’s equity)
A close look at the different components of book value reveals the following:
In millions
2006 2005 2004 2003 2002
Class 'A' common shares $14.00 $13.00 $13.00 $10.00 $10.00
Class 'X' common shares $6.00 $7.00 $9.00 $11.00 $13.00
Restricted share units (related to Class 'A' shares) $482,289.00 $365,708.00 $475,240.00 $669,860.00 $848,218.00
Deferred compensation $0.00 $0.00 -$150,777.00 -$112,251.00 $0.00
Additional paid in capital $701,006.00 $1,365,013.00 $1,643,652.00 $1,501,136.00 $1,397,828.00
Treasury shares -$869,957.00 -$763,682.00 -$132,313.00 -$88,198.00 -$315,486.00
Treasury shares owned by Accenture ltd share employee compensation trust $0.00 $0.00 -$296,894.00 -$308,878.00 -$221,110.00
Retained earnings $1,607,391.00 $962,339.00 $46,636.00 -$641,915.00 -$1,190,415.00
Accumulated other comprehensive loss -$26,494.00 -$232,484.00 -$113,760.00 -$188,233.00 -$80,432.00
SHAREHOLDER'S EQUITY $1,894,255.00 $1,696,914.00 $1,471,806.00 $831,542.00 $438,626.00
From the above table three things are clear :
1. The high ROE in 2002 was because of a large deficit in retained earnings that in turn reduced the book value. This started in the year 2001 ($1.43bn deficit) when the company broke from its traditional partnership type organization and became public. It can be seen that this got reduced in subsequent years and in 2006 was $1.6 bn
2. Additional paid in capital has decreased since 2002 and treasury stock has increased since then. Both together have decreased the book value.
3. As the company’s Net income before minority interest grows and its effect of minority interest gets reduced so the difference between two ROEs will also get reduced.
EFFECT OF TREASURY SHARES cost of shares in millions
Year Treasury shares COST
2002 12.5mn -$315,486
2003 5.2mn -$88,198
2004 6 mn -$132,313
2005 32mn -$763,682
2006 36mn -$869,957
Above fig shows the amount of treasury shares held by the company. It can be seen that the figure has been changing every year. As a conservative estimate let us assume that the number of treasury shares would have remained 6mn on Aug-31,2006 instead of 36 mn. The amount against treasury shares would have reduced from 869 mn to 144 mn. This would have increased the book value at least by 725mn. Thus making the book value around $2.6 bn. Making the two ROEs as 37% and 53% (ROE with net income before minority interest) instead of the present 51% and 75%.
CONCLUSION : So if you are comparing Accenture to its competitors and are impressed by its ROE then you might want to look at the details of its competitors’ book value and make sue you are comparing apples to apples.
Posted by Dayanand Menashi at Monday, June 25, 2007
Labels: Analysis of Accenture's stock
Sunday, January 27, 2008
Good artice on P/E ratio
The short-term outlook
Liquidity, demand-supply scenario, political uncertainties, budget, corporate announcements etc are some of the factors, which affect the price of a stock in the short-term.
Suppose there is good news flow for the steel industry. Then practically all the steel stock prices will move up even though some of these companies may not be performing too well.
Therefore, buying and selling in the short-term is more of a trading call than an investment call. It is suited more for a person who can invest his time daily to the stock market.
Therefore, buying and selling in the short-term is more of a trading call than an investment call. It is suited more for a person who can invest his time daily to the stock market.
The long-term outlook
The real benefit of investing in equity markets accrues through long-term investing.
Hence it is more pertinent to understand the stock valuation from a long-term perspective.
Hence it is more pertinent to understand the stock valuation from a long-term perspective.
In the long run, the price of a stock is the reflection of the operational performance of the company. The expected growth and future profits will determine the price. And because we have to take a view on the future prospects of the company, the industry and the economy in general, assessment of the 'right price' becomes difficult, subjective and prone to large volatility depending on how the future unfolds.
The Price/Earning ratio or the PE ratio is the term commonly used to assess the fairness of the stock price.
PE ratio is defined as the ratio of market price to earning per share (EPS).
PE ratio = Market price of the share /Earning per share (EPS)
EPS in turn = Profit After Tax (PAT) / Number of shares in the share capital
The common sense would dictate that lower P/E ratio means that the price is undervalued and higher P/E ratio means that the price is overvalued. Unfortunately, life is not so simple. If it were so, you would not be reading this article. You would be sitting on the stock market and minting money by buying low P/E ratio stocks and selling high P/E ratio stocks.
In absolute terms there is no 'right' PE. One cannot say that PE of a stock of say 10 or 15 is good or bad.One can only make sense of a P/E number of a particular stock bycomparing it with P/E of other companies in the same line of business comparing it with the benchmark indices say Sensex P/E or Mid-cap P/E assessing the growth potential of the industry assessing the growth potential of the particular company
Let's look at a couple of cases - Banking & IT - to get a better appreciation of the P/E number. Banking as an industry enjoys an average P/E of around 8-10, vis-�-vis IT, which enjoys PE exceeding 25-30. The reason is simple - growth.
In a normal scenario the profits of a bank are the spread it earns between the interest rates on deposits and lending. And this usually varies between 2-4 per cent.
If the interest rates on deposit go up, the lending rates will also go up and vice versa. Therefore, the profit potential of a bank is limited. And hence the P/E ratio for banks is usually below 10. The only option for a bank to grow is by increasing the asset size.
Banks like HDFC and ICICI are rapidly increasing their asset base every year vis-�-vis the nationalised banks. Hence, they enjoy much higher P/Es of 20-25.
On the contrary most IT companies are growing at 30-40 per cent p.a. Therefore, in anticipation or likelihood of such high growth rates, the P/E ratios of 25-30 are not unreasonable even for average IT companies. The larger and better companies may even enjoy P/E in excess of 30-35.
Therefore, one should keep in mind that:
There no concept of an absolute right PE
It is quite normal to invest in a high growth industry like IT with P/E of say 20, but not so for a low growth industry like bank
A low P/E vis-�-vis the industry average (e.g. Bank A is quoting at 3 PE as compared to the average of 8 PE for the banks) does not necessarily mean it is cheap. The PE may be low because the bank is having some problems and hence may not be expected to do well in the future.The P/E number requires careful analysis. Only then can one assess the over or under-valuation of a stock and decide on the investment worthiness of the stock.
author is executive director, Infra Solutions (India) Pvt. Ltd.
Wednesday, January 23, 2008
New NFO's and news
AIG Infrastructure and Economic Reforms Fund — A diversified theme
The fund: AIG Infrastructure and Economic Reforms Fund is an open-ended equity fund that aims to invest in companies that are likely to benefit from the above-mentioned issues. This includes sectors such as cement, metals and capital goods. Identification of economic reforms early on and the opportunities they would create for such sectors as banking or financial services, retail and investment is also one of the fund’s objectives.
Risk profile: Given the above investment strategy, the fund’s universe appears more diversified than regular theme funds and may therefore carry lower risks than concentrated sector funds. Nevertheless, the fund would call for more active entry and exit strategies by an investor than warranted by diversified equity funds. The fund could at best be a diversification option for the portfolio.
Pros and cons: A good number of existing funds with an infrastructure/capital goods theme do have a broad based investment universe in their mandate. For instance, Tata Infrastructure has substantial exposure to metals and financial services. There are also funds that seek to capitalise on opportunities that arise from capex spending.
AIG Infrastructure’s key distinguishing feature may be its plan to identify companies that have ‘multi-year opportunities’ that would outlast the primary infrastructure development. These companies may participate in infrastructure building but later branch out to complementary areas once the primary infrastructure needs are met.
However, given the plethora (over 15) of funds with a broadly similar theme now available in the market, AIG may at best be one more option in the space for now. Funds that entered at an early stage of the infrastructure spending by the Government have been the ones that have delivered the best performance. The fund house also has a limited track record in India, managing one diversified equity fund, AIG India Equity launched in May 2007.
Details: The offer closes on January 31. Mr Tushar Pradhan is the manager.
Source :Hindu
Fund Name : Reliance Natural Resources Fund from ADAG Reliance Mutual fund(Reliance Capital Asset Management Ltd.)
Issue Open 01-Jan-2008 and Closes on 30-Jan-2008
Scheme ObjectiveReliance Natural Resources Fund is an open-ended equity scheme.
To invest and generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources .
Fund Class Equity Diversified/Open-EndedInvestment plan GrowthFund Manager Ashwani KumarEntry Load 2.25 %/Exit Load 0.00 %
SBI Mutual Fund has launched SBI Tax Advantage Fund - Series I, a 10-year close ended Equity Linked Savings Scheme.
The scheme opens for subscription on Dec. 03, 2007 and closes on Mar. 03, 2008.
The units of the scheme will be available at Rs 10 per unit during the New Fund Offer period.
ObjectiveSBI Tax Advantage Fund - Series I aims at generating capital appreciation over a period of ten years by investing predominantly in equities of companies across large, mid and small market capitalization, along with income tax benefit.
The scheme does not offer facility of Systematic Investment Plan and Systematic Withdrawal Plan.
The scheme aims at raising a minimum of Rs 30 million during the New Fund Offer Period.
Investment made in the scheme will qualify for a deduction from Gross Total Income upto Rs 100,000 (along with other prescribed investments) under section 80 C of the Income Tax Act, 1961.
Asset AllocationThe scheme aims at investing 80% to 100% in equity and equity linked instruments and 0% to 20% in debt and money market instruments.
Load StructureAs it is a close-ended scheme there will not be any entry load further the scheme will also not charge any exit load.Investment Strategy
The investment strategy of the fund will be to invest in equities of companies, which will be highly tilted towards midcap companies that have the potential to grow at a reasonable rate in the long term.
.Performance and ManagementThe performance of the scheme will be measured against BSE 100 and the fund manager is Ritesh Sheth.
Sorce :IRIS
JM Financial MF launches JM Core 11 Fund-Series I
JM Financial Mutual Fund launched JM Core 11 Fund-Series I. It is a three-year close-ended equity oriented growth scheme with multiple series launched thereafter at such periods as may be decided by the AMC. The investment objective of the fund is to provide long-term growth by investing predominantly in a concentrated portfolio of equity and equity related instruments of companies. The fund will invest 65%-100% in equity and equity related securities with medium to high-risk profile. The fund will invest 0%-35% in money market and debt instruments including securitised debt. Securitised debt will not include foreign securitized debt. Exposure to derivatives would be capped at 50% of equity portfolio of the scheme.
The fund: AIG Infrastructure and Economic Reforms Fund is an open-ended equity fund that aims to invest in companies that are likely to benefit from the above-mentioned issues. This includes sectors such as cement, metals and capital goods. Identification of economic reforms early on and the opportunities they would create for such sectors as banking or financial services, retail and investment is also one of the fund’s objectives.
Risk profile: Given the above investment strategy, the fund’s universe appears more diversified than regular theme funds and may therefore carry lower risks than concentrated sector funds. Nevertheless, the fund would call for more active entry and exit strategies by an investor than warranted by diversified equity funds. The fund could at best be a diversification option for the portfolio.
Pros and cons: A good number of existing funds with an infrastructure/capital goods theme do have a broad based investment universe in their mandate. For instance, Tata Infrastructure has substantial exposure to metals and financial services. There are also funds that seek to capitalise on opportunities that arise from capex spending.
AIG Infrastructure’s key distinguishing feature may be its plan to identify companies that have ‘multi-year opportunities’ that would outlast the primary infrastructure development. These companies may participate in infrastructure building but later branch out to complementary areas once the primary infrastructure needs are met.
However, given the plethora (over 15) of funds with a broadly similar theme now available in the market, AIG may at best be one more option in the space for now. Funds that entered at an early stage of the infrastructure spending by the Government have been the ones that have delivered the best performance. The fund house also has a limited track record in India, managing one diversified equity fund, AIG India Equity launched in May 2007.
Details: The offer closes on January 31. Mr Tushar Pradhan is the manager.
Source :Hindu
Fund Name : Reliance Natural Resources Fund from ADAG Reliance Mutual fund(Reliance Capital Asset Management Ltd.)
Issue Open 01-Jan-2008 and Closes on 30-Jan-2008
Scheme ObjectiveReliance Natural Resources Fund is an open-ended equity scheme.
To invest and generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources .
Fund Class Equity Diversified/Open-EndedInvestment plan GrowthFund Manager Ashwani KumarEntry Load 2.25 %/Exit Load 0.00 %
SBI Mutual Fund has launched SBI Tax Advantage Fund - Series I, a 10-year close ended Equity Linked Savings Scheme.
The scheme opens for subscription on Dec. 03, 2007 and closes on Mar. 03, 2008.
The units of the scheme will be available at Rs 10 per unit during the New Fund Offer period.
ObjectiveSBI Tax Advantage Fund - Series I aims at generating capital appreciation over a period of ten years by investing predominantly in equities of companies across large, mid and small market capitalization, along with income tax benefit.
The scheme does not offer facility of Systematic Investment Plan and Systematic Withdrawal Plan.
The scheme aims at raising a minimum of Rs 30 million during the New Fund Offer Period.
Investment made in the scheme will qualify for a deduction from Gross Total Income upto Rs 100,000 (along with other prescribed investments) under section 80 C of the Income Tax Act, 1961.
Asset AllocationThe scheme aims at investing 80% to 100% in equity and equity linked instruments and 0% to 20% in debt and money market instruments.
Load StructureAs it is a close-ended scheme there will not be any entry load further the scheme will also not charge any exit load.Investment Strategy
The investment strategy of the fund will be to invest in equities of companies, which will be highly tilted towards midcap companies that have the potential to grow at a reasonable rate in the long term.
.Performance and ManagementThe performance of the scheme will be measured against BSE 100 and the fund manager is Ritesh Sheth.
Sorce :IRIS
JM Financial MF launches JM Core 11 Fund-Series I
JM Financial Mutual Fund launched JM Core 11 Fund-Series I. It is a three-year close-ended equity oriented growth scheme with multiple series launched thereafter at such periods as may be decided by the AMC. The investment objective of the fund is to provide long-term growth by investing predominantly in a concentrated portfolio of equity and equity related instruments of companies. The fund will invest 65%-100% in equity and equity related securities with medium to high-risk profile. The fund will invest 0%-35% in money market and debt instruments including securitised debt. Securitised debt will not include foreign securitized debt. Exposure to derivatives would be capped at 50% of equity portfolio of the scheme.
Sunday, January 6, 2008
Article on sensex for FY 08 - says 32K - Economice Times (7/1/08)
32K!!!
Our attempt to find the Sensex’s targets for 2008 by using the Fibonacci ratios threw up some mind-blowing numbers…
shakti shankar patra
THE CURRENT bull run on the Indian bourses has surprised even the most optimistic analysts and has made a mockery of all predicted targets. Although the market has seen substantial valuebased corrections — the one after the NDA debacle in May ’04, the commodity-led correction in May-June ’06 and last year’s subprime related correction — it has consistently managed to shrug off these setbacks and bounce back to make newer highs. It has also made a fool out of all those who have used these corrections to write a bull obituary. So, as the bull market enters its fifth year, we set out on the arduous task of finding out the possible targets for the Sensex in ’08. In the process, we stumbled upon a certain method of technical analysis based on Fibonacci ratios, which have seen considerable success in finding the annual targets of the Sensex in the past. To put the method in place, we considered the Sensex’s monthly charts in a calendar year. We then subtracted the lowest monthly closing from the highest monthly closing, taking into account the Sensex levels at the end of each month. This difference gave us the range for that particular year. We then multiplied this range with the Fibonacci ratios of 0.382, 0.618, 1 and 1.618 to get various multiples. Then these multiples were added to the tops and subtracted from the bottoms of that particular year to give us the targets and supports for the next year. For example, the highest and lowest monthly closes for the Sensex in ’04 were 6602.69 in December and 4759.62 in May, giving us a range of 1843.07. This value of 1843.07 multiplied to the Fibonacci ratio of 1.682 gives us 2982.08. And 2982.08 added to the highest monthly close of ’04, i.e. 6602.69 gives us 9584.77, which is strikingly close to the top we saw in ’05, i.e. 9442.98. LOOKING AHEAD As we can see from the table below, at least one among these Fibonacci ratios has given us a target that is in a range of +/- 5% of the final realised value of the Sensex. Taking this calculation forward, the highest monthly close of the Sensex in ’07 was 20286.99 in December. Similarly, the lowest monthly closing value was 12938.09 in February, giving us a range of 7348.9. If we multiply this range to the various Fibonacci ratios like 0.382, 0.618,1 and 1.618, the corresponding multiples are 2807.28, 4541.62, 7348.9 and 11890.52 respectively. So, in order to find the Sensex targets for ’08, we added these multiples to the highest monthly closing of the Sensex in ’07, i.e. 20286.99. So, the possible targets of the Sensex in the year ’08 at 0.382, 0.618, 1 and 1.618 Fibonacci ratios are 23094.27, 24828.61, 27635.89 and hold your breath, 32177.51, respectively. SHOW ME THE BRAKES However, as the market keeps heading northwards, the margin of safety keeps getting smaller for an investor. This further enhances the importance of an appropriate stop loss. In order to find that for the Sensex, we looked into various technical indicators, besides the ones based on the abovementioned Fibonacci ratios. The stop-loss level for the Sensex will vary from trader to trader based on his/her trading horizon. For a very short-term trader, the stop loss will be the rising trend line joining the bottoms made on October 22, November 22 and December 19. This value is roughly around the 19400 mark at close on December 31. On the other hand, a long-term investor can use the simple 200-day moving average (DMA) as a stop-loss level, which at close on December 31, was at 15995. Just how important this 200 DMA is for the overall continuation of the bull market can be gauged from the fact that after languishing below the 200 DMA for a long time, the Sensex moved above it in May-June ’03, signalling the beginning of the bull market. In the subsequent years, this 200 DMA has provided the market stunning support and has been broken only twice — during the NDA debacle in May ’04 and the commodity-led crash of May ’06. However, on both these occasions, the market has managed to bounce back above it to signal the continuation of the bull market. Moreover, the Sensex has got support and bounced back from the 200 DMA on many other occasions, including during the recent subprime-related crash. So, a decisive close below it, in all probabilities, will signal the end of the bull market. However, for a more optimistic investor, the final level to watch out for is the lowest monthly close in ’07 — 12938.09 in February. A close below this will mean that the Sensex will have made a lower low for the first time since the beginning of the current bull run, signalling its end. Another point to consider is that post the April ’92 peak of around 4500, the Sensex spent 11 long and painful years in a consolidation mode with several bottoms around the 3000 mark. Although it tried to break out of this range and even managed to make a new high in late 1999, early ’00, this break-out proved out to be a false one and it once again slid to make three more bottoms around the 3000 mark. The real break-out came in June ’03 when the Sensex said a final good bye to the 3000 mark and set out for the sky. A break-out from an 11-12 year consolidation is generally seen as a very powerful break-out and the ensuing uptrend can last for many years, if not decades. Moreover, the fact that the Sensex has continuously made higher tops and higher bottoms suggests that the bull run is strongly in place.
Our attempt to find the Sensex’s targets for 2008 by using the Fibonacci ratios threw up some mind-blowing numbers…
shakti shankar patra
THE CURRENT bull run on the Indian bourses has surprised even the most optimistic analysts and has made a mockery of all predicted targets. Although the market has seen substantial valuebased corrections — the one after the NDA debacle in May ’04, the commodity-led correction in May-June ’06 and last year’s subprime related correction — it has consistently managed to shrug off these setbacks and bounce back to make newer highs. It has also made a fool out of all those who have used these corrections to write a bull obituary. So, as the bull market enters its fifth year, we set out on the arduous task of finding out the possible targets for the Sensex in ’08. In the process, we stumbled upon a certain method of technical analysis based on Fibonacci ratios, which have seen considerable success in finding the annual targets of the Sensex in the past. To put the method in place, we considered the Sensex’s monthly charts in a calendar year. We then subtracted the lowest monthly closing from the highest monthly closing, taking into account the Sensex levels at the end of each month. This difference gave us the range for that particular year. We then multiplied this range with the Fibonacci ratios of 0.382, 0.618, 1 and 1.618 to get various multiples. Then these multiples were added to the tops and subtracted from the bottoms of that particular year to give us the targets and supports for the next year. For example, the highest and lowest monthly closes for the Sensex in ’04 were 6602.69 in December and 4759.62 in May, giving us a range of 1843.07. This value of 1843.07 multiplied to the Fibonacci ratio of 1.682 gives us 2982.08. And 2982.08 added to the highest monthly close of ’04, i.e. 6602.69 gives us 9584.77, which is strikingly close to the top we saw in ’05, i.e. 9442.98. LOOKING AHEAD As we can see from the table below, at least one among these Fibonacci ratios has given us a target that is in a range of +/- 5% of the final realised value of the Sensex. Taking this calculation forward, the highest monthly close of the Sensex in ’07 was 20286.99 in December. Similarly, the lowest monthly closing value was 12938.09 in February, giving us a range of 7348.9. If we multiply this range to the various Fibonacci ratios like 0.382, 0.618,1 and 1.618, the corresponding multiples are 2807.28, 4541.62, 7348.9 and 11890.52 respectively. So, in order to find the Sensex targets for ’08, we added these multiples to the highest monthly closing of the Sensex in ’07, i.e. 20286.99. So, the possible targets of the Sensex in the year ’08 at 0.382, 0.618, 1 and 1.618 Fibonacci ratios are 23094.27, 24828.61, 27635.89 and hold your breath, 32177.51, respectively. SHOW ME THE BRAKES However, as the market keeps heading northwards, the margin of safety keeps getting smaller for an investor. This further enhances the importance of an appropriate stop loss. In order to find that for the Sensex, we looked into various technical indicators, besides the ones based on the abovementioned Fibonacci ratios. The stop-loss level for the Sensex will vary from trader to trader based on his/her trading horizon. For a very short-term trader, the stop loss will be the rising trend line joining the bottoms made on October 22, November 22 and December 19. This value is roughly around the 19400 mark at close on December 31. On the other hand, a long-term investor can use the simple 200-day moving average (DMA) as a stop-loss level, which at close on December 31, was at 15995. Just how important this 200 DMA is for the overall continuation of the bull market can be gauged from the fact that after languishing below the 200 DMA for a long time, the Sensex moved above it in May-June ’03, signalling the beginning of the bull market. In the subsequent years, this 200 DMA has provided the market stunning support and has been broken only twice — during the NDA debacle in May ’04 and the commodity-led crash of May ’06. However, on both these occasions, the market has managed to bounce back above it to signal the continuation of the bull market. Moreover, the Sensex has got support and bounced back from the 200 DMA on many other occasions, including during the recent subprime-related crash. So, a decisive close below it, in all probabilities, will signal the end of the bull market. However, for a more optimistic investor, the final level to watch out for is the lowest monthly close in ’07 — 12938.09 in February. A close below this will mean that the Sensex will have made a lower low for the first time since the beginning of the current bull run, signalling its end. Another point to consider is that post the April ’92 peak of around 4500, the Sensex spent 11 long and painful years in a consolidation mode with several bottoms around the 3000 mark. Although it tried to break out of this range and even managed to make a new high in late 1999, early ’00, this break-out proved out to be a false one and it once again slid to make three more bottoms around the 3000 mark. The real break-out came in June ’03 when the Sensex said a final good bye to the 3000 mark and set out for the sky. A break-out from an 11-12 year consolidation is generally seen as a very powerful break-out and the ensuing uptrend can last for many years, if not decades. Moreover, the fact that the Sensex has continuously made higher tops and higher bottoms suggests that the bull run is strongly in place.
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