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Govt may consider FDI in specific retail sectors: Nath

New Delhi, Feb 10: The government may allow Foreign Direct Investment (FDI) for specific sectors such as electronic and sports goods in retail if an expert study going into the issue foresees no impact on the neighbourhood mom and pop stores.

"We are expecting the ICRIER report on retail by the end of February. Certainly, we can be more flexible in areas of retail like electronics and sports goods. But, I want to see the whole report and make sure what I believe is correct and is backed by a report," Commerce and Industry Minister Kamal Nath said.

Nath said he had commissioned the Indian Council of Research in International Economic Relations (ICRIER) to come out with a study on retail to understand the impact of big retail on the small shops.

"Until I have the ICRIER report, I cannot do (open) retail. I have got to ensure these basic things. The point is that the neighbourhood store should not be hit," he said, adding that the retail has to be seen in a totally India-specific context and not in a general sense.

"Retail in India is not like retail in Malaysia or Thailand," he said.

However, opening sectors like electronics, sports goods, pharmacy and confectionery to FDI would not have an impact on the neighbourhood stores but would instead drive the Indian industry, Nath said.

***** may reject Microsoft bid

San Francisco, Feb 10: ***** Inc`s board will reject Microsoft Corp`s USD44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.

The decision could provoke a showdown between two of the world`s most prominent technology companies with Internet search leader Google Inc looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help ***** avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.

If the world`s largest software maker wants ***** badly enough, Microsoft could try to override *****`s board by taking its offer — originally valued at USD31 per share — directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust *****`s current 10-member board.

Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as USD35 per share for *****, which still boasts one of the Internet`s largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.

*****`s board reached the decision after exploring a wide variety of alternatives during the past week, according to a source. The person didn`t want to be identified because the reasons for *****`s rebuff won`t be officially spelled out until Monday morning.

Microsoft and ***** declined to comment Saturday on the decision, first reported by The Wall Street Journal on its website.

*****`s board concluded Microsoft`s offer is inadequate even though the company couldn`t find any other potential bidders willing to offer a higher price.

Without other suitors on the horizon, ***** has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.

"You would expect *****`s board to reject Microsoft at first," Marlin said. "If they didn`t, they would be accused of malfeasance."

But by spurning Microsoft, ***** risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.

The downturn caused *****`s stock price to plummet by more than 40 percent, erasing about USD20 billion in shareholder wealth, in the three months leading up to Microsoft`s bid.

Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above *****`s stock price of just USD19.18 when the bid was announced Feb 1. ***** shares ended the past week at USD29.20.

Led by company co-founder and board member Jerry Yang, ***** now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What`s more, Yang and the rest of the management team must convince Wall Street that they can boost *****`s market value beyond Microsoft`s offer.

*****`s shares traded at USD31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as *****`s chief executive officer.

This isn`t the first time that ***** has spurned Microsoft. The Redmond, Wash-based company offered USD40 per share to buy ***** a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn`t want to be identified because that bid was never made public.

***** now may want that Microsoft to raise its price to at least USD40 per share again. That would force Microsoft to raise its current offer by about USD12 billion — a high price that might alarm its own shareholders.

Microsoft`s stock price already has slid 12 percent since the company announced its ***** bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.

Although it isn`t involved directly in the deal, Google is the main reason ***** is being pursued by Microsoft.

***** has struggled largely because it hasn`t been able to target online ads as effectively as Google.

Microsoft believes *****`s brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google`s huge lead in the lucrative Internet search and advertising markets.

As it examined ways to thwart Microsoft, ***** considered an advertising partnership with Google — an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if *****`s plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.

A Microsoft takeover of ***** would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that *****`s board decided to spurn Microsoft.

Mkts could see old highs in 4-6 weeks: DSP Merrill Lynch
2008-02-09 12:22:56
S Naganath of DSP Merrill Lynch said, the markets are likely to see an upside over the next 4-6 weeks, which could take it back to its old highs. However, he expected the markets to be extremely choppy after the Budget, between April and September '08, but added that a rally was likely in the last quarter of 2008.

Commenting on earnings, he said while there was a slowdown in earnings, in general, they were reasonably good and had not caused substantial amount of disappointment.

Excerpts from CNBC-TV18's exclusive interview with S Naganath:

Q: How do you find the markets now, these are interesting times, both for primary and secondary markets? How is the risk reward balance looking from here?

Naganath: It has been certainly interesting. We have seen a spate of negative newsflow internationally that seems to have spooked the stock market in the last week to ten days. But we are getting to a point where the markets are beginning to look oversold, and I do believe that over the next 4-6 weeks, we should see a nice bounce on the upside.

Q: How have you read the primary market action and the fact that a couple of large influential IPOs had to be pulled?

Naganath: I can’t comment on individual IPOs. I suppose whatever decisions were taken were in response to the market conditions in the last week or so. But looking forward, I think the risk reward looks like 5% on the downside and probably 15% on the upside over the next 4-6 weeks given that markets were looking oversold and the element of open interest in the F&O market seems to have come down substantially, the results season has been extremely good, the possibility of rate cuts in the next month or two are quite good, given what’s happening around the world with central banks cutting rates, also the fact that, looking ahead we have the Budget.

So all in all, I am of the view that things should start looking up as early as next week over the next month and a half.

Q: You said that earnings were fine but a lot of people have commented that it was about the weakest earnings quarter that they have seen in a long while. Are you worried that things are beginning to slow down a bit?

Naganath: Certainly for FY09, the expectations for GDP growth are somewhere between 8%-8.5%, which is much lower than the 9%-9.5% we saw in the previous couple of years or so. Against that backdrop, yes we are expecting earnings to moderate down to the 17%-18% level for FY09, and similar level of earnings for the following fiscal year.

So this is not something new. Given the high base that we have created in terms of earnings growth over the last three years, this was only to be anticipated. So I don’t find anything greatly surprising in the fact that there has been a moderation. It is because of the base effect.

It is possible that in certain pockets, we have seen some amount of earning slowdown. But otherwise, in general across the market, the earning numbers have been reasonably good, nothing that can cause substantive disappointment.

Q: Your upmove call for the next 4-6 weeks is a near-term tactical call or are you convinced that the worst is over for this year?

Naganath: It is a tactical call. I had said this earlier as well, the bounce that lasts for maybe a month to month and a half, and then the second quarter and the third quarter this year basically from the April all the way to September, is going to be a very choppy market because again you would have renewed newsflow, as western banks, and financial institutions announce their results for the March quarter. Then we could have some pockets of volatility and disappointment in terms of perhaps further write-downs, whether it is credit debt or subprime loans or other mortgage securities that they hold in their books.

And then I do expect that once all this newsflow out of the way, in the fourth quarter 2008 we should expect a smart rally. It is too early to look at 2009, but if you look at the GDP growth estimates currently put out by many economists, it is quite possible that India maybe the fastest growing economy in Asia, as China perhaps slows down as their exports begin to slowdown.

So 2009 could be a very good year for Indian equities. But 2008 would be the year when we basically consolidate after a difficult second, third quarter and then perhaps begin to rally again in the fourth quarter.

Q: What kind of an index band would you see this volatility in? Do you think the lows are in place or do you expect the lows to be violated in the volatility of mid-year that you are talking about?

Naganath: It is possible that in the mid-year my view is that perhaps will test at that point the levels that we saw in August when the subprime crisis broke out around the 14,000-15,000 levels. On the upside we could well retest the old high if the bounce that we do anticipate turns out to be fairly sharp and it can be when you have oversold markets, the rebounds are equally sharp.

Q: What about flows, we have seen USD 5 billion go out? Where is the pressure coming form do you think on this incessant withdrawal of money that has been happening for the last 4-5 weeks?

Naganath: I think if we look at USD 4-5 billion in absolute terms, obviously it sounds like a large number. If you put it in context the market is approximately USD 1.5 trillion in terms of size and thereabouts, approximately 20% from my estimate in the hands of FII that is about USD 300 billion or so. We had about 14-15 billion come in the second half of 2007.

So again if you put it all in context of overall investment by FII in a cumulative sense, the flows that we saw in the second half of last year, these flows are only expected to be given the volatile nature of the markets in the last six weeks and the sell off that we saw in late January.

So, if the markets begin to start steadying and moving up, you will find money coming back in. So I am not too concerned about the possibility of minimal inflows even if markets bounceback. I’m sure they will come back in.

Q: What would stay out of now, because valuations are somewhat different now from any sectors than they were just about a month back what looks attractive and what looks unattractive after the correction?

Naganath: What look attractive are certainly the banks. If we do see some rate cuts over the next few months I think the banks should do well particularly the state-run banks which are available at very attractive valuations. We are still positive on capital goods and the engineering sector. Some may argue that valuations there are a over little overstretched but again if one chooses carefully there are many companies out there that have done exceedingly well, have huge order books and can execute very well. So we do see a lot of stocks in that segment that can do very well over the next year or two.

I’m quite positive on the media sector, which I think is still undervalued relative to its potential over the next few years. Also pharma and FMCG perhaps be sort after now as defensive component of the portfolios and they are looking attractive. What one would not look at is difficult to say. One can probably look at underweighting the auto segment a bit, the oil refining segment, which anyway have been underweight in many portfolios for quite some time.

One is sitting on the fence in technology. One has to evaluate the extent of the impact on margins over the next few quarters. Broadly those are two or three sectors that one would sit on judgment over the next month or two before deciding if one needs to up or reducing weightage.

Expect mkts to rally before budget: BNP Paribas
2008-02-05 17:46:25
Speaking to CNBC-TV18, K Ramachandran, Head- Advisory Desk at BNP Paribas said that the fundamentals of the Indian equities continue to be strong though the 30% decline was quite unwarranted. He added that the markets would do well to consolidate and remain in a fairly narrow range because markets are unlikely to breakout very significantly on the higher side since the flow of money from overseas is no longer going to support it.



Excerpts from the exclusive interview with K Ramachandran:



Q: What’s your own assessment of domestic liquidity at this point in time in the context of all these issues and listings in the pipeline?



A: I think domestic liquidity is definitely constrained and it’s hit by two factors; the two big IPOs that have taken away a lot of money from the system and the overall sentiment, which is not positive. The fact that the markets have registered nearly 30% decline in the correction has caused quite a bit of concern among investors particularly the non-institutional investors. Therefore money flows are little hard to come by at this point and the news that couple of IPOs have run into rough weather is not something which is going to bring cheer to investors in the coming weeks.



Q: What do you expect this market to do over the next few weeks, as we get closer to the Budget? Do you think the midcaps might surprise this time and rebound faster than most expected?



A: I think the fundamentals of the Indian equities continue to be strong and the 30% decline was quite unwarranted. Secondly, the correction also happened across the board and there was hardly any discrimination on the part of the investors when it came to offloading stocks. So, there is good value across the board and since the fundamentals continues to be strong, I think in the run-up to the Budget expectations, there will be further impetus to economic growth so therefore stocks will react to that and because valuations have got moderated, good amount of appreciation can be expected in the run-up. But the local markets will continue to be weighed down by the global factors, which continue to be quite negative at this point of time. I don’t think there is going to be any support from global cues for the Indian markets.



Q: As things stand today, can you make a case for a significant breakout either way on the frontline indices especially because they have been the ones that have taken the big percentage moves either way in the run up over the next two-three weeks or do you think that you are fairly comfortable in terms of a rangebound movement due to the lack of news flow?



A: I think the markets would do well to consolidate and remain in a fairly narrow range because markets are unlikely to breakout very significantly on the higher side because the one factor, which has been driving the Indian markets is the flow of money from overseas which is no longer going to support. That is going to be a dampening factor, so therefore there is very little likelihood of markets running away on the high side. On the lower side, the markets will be underpinned by the continued strong fundamentals and fairly good values available at this point of time. So if the market moves either way in good degree of volatility, it would be more because of uncertainty and certain amount of panic in the minds of people who have probably taken excessive exposure.



Q: What’s your sense of what the big cue is for this market or what is the bidding time to watch for? Is it indeed the Budget or do you think whatever move happens directionally is going to be dependent on global developments?



A: I think it will be a mix of all these factors because generally in the run-up to the Budget, there is an expectation that there could be some kind of fresh impetus and fresh lease of life provided to this bull market in terms of policy announcements. So therefore, one cannot takeaway the general positive feeling around the Budget time. I think the market, as long as it is driven by liquidity flows, a lot of good news gets factored into the price way before they will show up in the profit & loss accounts and balance sheets.



So therefore, the market is going to be somewhat subdued, thanks to the global uncertainties and certain amount of curtailment in global investment flows into India. So therefore while fundamentals continue to be strong and there is every reason for the secular bull market to continue, over bearing global negatives will put some sort of lid on this bull market.



Q: There is still some ambiguities on what may happen with interest rates come April. A lot of infrastructure companies are talking about a slowing down in terms of order book and there are a lot of people talking about valuations being fairly rich in power as a sector. If you were to find value in a market such as this looking at about 18-19 times one year forward earnings, where would you park your money at these levels on the indices?



A: I think the equity asset class continues to be obviously the most favoured one and it is likely to deliver strong returns going forward but I would bet on the largecap category at this point of time rather than midcap. The midcap will obviously be good structural stories over maybe next two-three years but at this point of time, the first recovery will actually come in the largecap stocks because they have been beaten down beyond reasonable levels. Therefore any positive change in the overall structure of this market will obviously benefit the largecap stocks. So equity is very clearly the favourite asset class and within that, the largecap company is a good mix, a broad base kind of portfolio.


Q: You have tracked banking and financials for a long time, what did you make of the kind of reaction which a lot of the brokerage stocks got when they first listed then the subsequent hammering down and now the complete aversion to them as a space?



A: Yes, it was always a risky space to be in because it is so much dependent on the state of the financial and the capital markets and the valuations quoted were simply not in line with what their basic business models warranted. It is a very competitive business with thin margins. So a lot of expectations were based on the fact that these companies could be a target for some of the major global players. So I think too much of good news or expectations has built in to the price and once the overall global scenario itself came under threat, I think the natural consequence was for these stocks to really take a severe drubbing which is what we are seeing at this point of time.

To my mind I think these stocks have to correct considerably more from these levels to really make good investment proposition.

Bullish on BFSI, infra, cap goods & power: Mirae Asset
2008-02-07 15:51:46
Arindam Ghosh, CEO, Mirae Asset Global Investment Management has a view that earnings growth will be moderate and markets will consolidate in short-term. Speaking to CNBC-TV18, he adds that he is positive on BFSI, infra, cap goods & power.



Excerpts from the exclusive interview with Arindam Ghosh:



Q: What’s your own sense of what’s happening on the markets right now? In the past, this weakness has come close to Rs 132, are you sensing inherent weakness to the run up to the budget or you think we are going to be fairly range bound?



A: Markets are kind of consolidating at these levels; there is element of moderation and growth which has already started happening, but we really don’t see the market coming off significantly from these levels, our belief is going forward, we will see allocations starting to increase to the emerging markets and therefore if you adjust the embedded value currently, the PE would be at around 13 or 13.5, so we are kind of very close to the bottom, the market can probably move up from here.



Q: The fund that you are launching today is your main equity offering, it is an interesting timing that you are launching this fund at, what are you hoping in terms of getting an average return if you are looking you have a 2-3 year horizon on this one?



A: This is a fund which actually sits in between a large diversified fund and a sector fund and therefore clearly our effort would be all point in time to try and maximize opportunities that we get to see across sectors, styles and caps. At the same time, we are trying to minimize risks for our investors. In terms of returns of course, we are looking at a reasonable return if investors stay for a little longer period of time.



Q: You mentioned 2 important factors, valuations and earnings, where would you park your money in this point of time. If you have taken a look at it, there have been a lot of sectors that have churned, real estate, IT etc. where are you finding value and consequently what is still looking rich for you even though the markets have corrected so much?



A: There are many sectors which are insulated to what has been happening across in US and EU and those are the sectors where we would like to be taking a position on, and as far as the valuation is concerned, we are also quite positive on the banking and financial services sector. We stay quite bullish on infrastructure and capital goods and power. So these are the sectors where we would in the initial period be looking at very closely but as I said we don’t have a particular sector bias, our fund would be able to swing from one sector to another or from one style to another and maybe from one market cap to another so. So to that extent, it’s going to be a fund which and would be pretty much dynamic and can swing across.



Q: Like you said, it’s a great time to be investing but on the upside, how much do you think, this market can really stretch itself to and what are the kind of returns you think it could afford over a year or an 18 month period?



A: The upside looks quite attractive, though we wouldn’t like to put an exact number, but a fair estimate would be a band of about 15% to 20% or thereabouts.



Q: From a fund manager’s perspective, is there something that you like, the lower the value the better it is to get in. How have you approached with what’s happened with the couple of the IPOs that had to be reprised, do you think it is one of the valuation concerns or more of a secondary market phenomenon, and consequently throw in Reliance Power in there as well since you mentioned you like power, what are you expecting from that particular stock on listing?



A: We shouldn’t do any kind of a general conclusion on the basis of what’s happened in the last trend and we are seeing the last couple of new offers, we need to give it a longer time, clearly as an economy, our dependence on US markets continue through the equity financing route and there the importance is more than our export front but clearly our view is that we would going forward, get to see increased interest in participation starting to again trickle in into the new fund offers.

Mkts may deliver 25-30% returns going forward: Edelweiss
2008-02-05 13:24:23
Speaking to CNBC-TV18, Vikas Khemani, Executive Vice President and Co-Head-Institutional Equities, Edelweiss said it is possible to make 25-30% returns this year.



According to Khemani, the market has seen a bottom and is going to consolidate in the broad range of 200 points on the Nifty.



In the run-up to the Budget, there will be cautiously positive optimism in the markets, he added.



Excerpts from CNBC-TV18’s exclusive interview with Vikas Khemani:



Q: How are you approaching the markets, in the next three weeks in context of-earnings and liquidity?



A: A large part of the pain seems to be out of the system. Open interest positions of the F&O segment, which was about Rs 1,08,000 crore, has come down to almost Rs 56,000 crore. So, a large part of the leveraged position is out of the system. We have weak players out of the system.



Global markets seem to be stabilising. So, I believe that the market has seen the bottom and is going to consolidate in the broad range of 200 points on the Nifty. Activity will seem to be very low and you will see only stock specific activity.



So, we will see some expectation getting built as we move closer to the Budget. The sense that we get from the institutional side is that there is not too much expectation getting built from the Budget. In a way it is good. But I don’t see a one-way running market.



My sense would be that from here to the Budget, you would see cautiously positive optimism. You will see the market moving slowly upwards, though it could be broadly in a range of 5,200 on the downside and it could get closer to 5,800 or so on the upside.



Q: Where can value emerge at this point of time? On days we are seeing IT, FMCG, healthcare, all of them bouncing back pretty much. These have all been ignored sectors for a while. Where are you looking for value at current levels?



A: IT is one of the beaten down sectors. You have seen valuations getting really attractive and growth also seems to be visible. A lot of institutional investors are doing bottomfishing out in IT counters. At the same time, when the market bounces back, these are the counters that do not give huge amount of returns. These are contrarian plays.



I would advise investors to look at stocks where there is possible growth like capital goods, banking, and financial sectors. These are sectors where you will have growth continuing even when the economy grows at 8.5-9%. Within these sectors, you can have your picks. One can also look at stocks posting good performance supported by results, like you saw in capital goods and engineering sector, where L&T reported strong growth, whereas a lot of counters missed out. So, one has to choose within those sectors. I would still go for growth rather than value.



Q: Given the kind of earnings cool-down that we have seen in the quarter just gone by, what would be the highs for the index say in 2008 itself? Given the kind of limits posed by earnings, would you be cashing out in whatever highs the market might give you?



A: Putting a high number based only on earnings would probably not be appropriate for the simple reason that markets don't get driven only by earnings. Over a longer-term period, earnings play out. If we see a liquidity surge in the second half of the year, then we would again see some frenzy getting built in. We can easily make 25-30% return this year through equity markets. One could stick to index stocks or to solid counters or sectors where there is growth and delivery happening.



Incrementally in the last 3-6 months, a lot of investors have started ignoring the execution part. Managements that can execute and deliver what they promise to the market will outperform in the market. When sanity prevails, investors go back to managements that deliver what they promise. So, execution is the key. That is where I would want to put money.

Reliance Vision Fund buys RIL, ICICI Bank, SBI
2008-02-09 15:55:37
Reliance Vision Fund has enhanced its exposure to the banking & financial services, oil & gas and telecom sector in the month of January 2008, but reduced exposure to pharmaceuticals, metal & mining, tobacco, IT, engineering & capital good and auto space.



In the banking & financial services sector, the scheme bought nearly 10 lakh shares of IDFC and accumulated over 4 lakh shares of ICICI Bank. It however sold nearly 4 lakh shares of Indiabulls Financial Services and exited from HDFC Bank by dropping nearly 3 lakh shares. (View - What is Reliance Vision Fund buying / selling?)



In the oil & gas space, it bought nearly 5 lakh shares of Reliance Indusrties but offloaded over 14.5 lakh shares and exited from HPCL. In the telecom space, it bought over 12 lakh shares of Reliance Communication. Some other big names on the buy list were Deccan Aviation, Indian Hotels, TV18 and Gujarat State Fertilizers.



On the other hand, the scheme sold nearly 20 lakh shares of Ranbaxy and exited from the counter in pharma space. In the metal segment, it exited from SAIL by offloading nearly 30 lakh shares but also bought tata steel.



In the IT space, it sold nearly 3 lakh shares of Infosys and nearly 1.5 lakh shares of TCS. The scheme sold nearly a lakh shares of Siemens but bought over 6 lakh shares of Bharat Forge. It also exited from Bajaj Auto with over 2 lakh shares.



Reliance Industries, ICICI Bank and SBI were the top stocks held by the scheme in January. Banking & Finance (16.16%), Engineering (12.16%) and Auto (9.44%) were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by Reliance Vision Fund).




The equity exposure of the scheme has dropped from 96.37% to 87.65%. The total assets managed by the scheme over the month were Rs 4189.53 crore as on January 31, 2008.



Over the last one year, Reliance Vision Fund has yielded 28.3% returns as against 26.53% yielded by its benchmark BSE 100 as on February 7, 2008.

Global Concerns – Should investors stay away from equity?
2008-02-04 11:10:
In one of my previous columns published in September 2007, I had noted “Indian Investors will be surprised to know that there are a lot of US Money Market Funds that have invested in subprime debt. Also there are several other financial institutions that have huge exposures to subprime debt. According to a recent Bloomberg column, AIG, the world’s largest insurer and reinsurer, had almost one third (33%) of its USD 104 billion networth invested in subprime related securities. And there are several such insurance companies with subprime exposure of 3 to 20 % of its networth. What would happen if one of these institutions or some large hedge fund with huge exposure collapses like the one we witnessed in August this year? Surely our markets will come down and the ‘decoupling’ that is a buzzword these days might seem like a joke.”

Market turmoils – How to capitalize on them
'Subprime' woes – What should investors do?
Till now we have just had the bad news coming in from Citigroup, Merrill Lynch, and other institutions. Now it’s the turn of bond insurers with recent estimates of billions of dollars in losses by bond insurers MBIA and AMBAC; and S&P announcing that it will cut ratings on over $500 billions of subprime mortgage securities and CDOs. This was in addition to UBS recent announcement of further write-downs of mortgage related assets (write-downs for the global financial sector now exceed $130 billion). I wonder what will happen if any of the insurance companies start reporting such losses. The Federal Reserve’s two successive cuts clearly indicate that there is more pain in the system than seen by the normal eye.

So what could be the implications for equity market investors and what should one do?

When markets go up, everyone is super confident and sees higher and higher levels. If I am not mistaken, the next level sought was around 25000 and if I am not mistaken, there was lot of chit chat going on about the market reaching 25000 before the budget itself. Now when stocks are collapsing, worst-case scenarios loom large in most investor’s minds and levels of 12000 are seen as the next surefire levels.

During the 1929 US Great depression and the greatest stock market crash in history, Dean Witter in one of his letters to his clients wrote, “There are only two future scenarios that are possible. Either we are going to have chaos or recovery. The former theory is foolish. If chaos ensues nothing will maintain value - neither bonds nor stocks, not even bank deposits or gold. Real Estate will be a worthless asset because titles will be insecure. No policy can be based upon this impossible contingency. Policy must therefore be based on the theory of recovery. The present is not the first depression; it may be the worst, but just as surely as conditions have corrected themselves in the past and have gradually readjusted to normal, so this will again occur. The only uncertainty is when it will occur. I wish to say emphatically that in a few years present prices will look ridiculously low. ”

In hindsight, these words echo wisdom and sound judgment about the temporary aberrations and behavior of stock prices and the stock market. However when these words were written, investors were so pessimistic about the future that this message went on deaf ears.

Are we in a scenario that spells doom or chaos? No absolutely not as far as the economy and corporate India’s fundamentals seem to suggest, but a quick look at some of the business headlines “Gone in 60 Seconds”, “Chuck De India”, and “Saare Zameen Par”, however entertaining would cause some heartburn.

So what should be the strategy in a market like this? There could be some pain in the market for some more time. We had seen some excesses in May 2006 where the markets corrected by almost 35% and leverage is one of the biggest reasons why markets such as ours crash. The art of making money in this market is not to panic but to do exactly the opposite of what the people are doing.

Invest with a long-term perspective for your goals and wealth creation. Keep a long-term outlook for your investments, as there is a possibility that the investments done could fall further for a short while. Third, never panic in this market. Don’t watch TV channels portraying bloodbath and calculate your losses or gains daily (instead watching Saas Bahu sagas for a change could be a good option). This will just make things worse and compel you to act.

Like we have mentioned earlier there will be corrections and there is none and will never be any equity market without corrections and volatility. If the level of equity in your portfolio makes you uncomfortable, speak to your financial advisor and rebalance your asset allocation. If you have been holding cash, buy on every fall. The market might still go down after you buy but this is precisely why you are getting a higher return on the investments and this is what is called as RISK. Another strategy could be to wait (I am certainly not advocating market timing) and be patient for some FII buying and liquidity to resume.

In the meantime, just remain calm and stay put. Hold on to your portfolio and do not take any rash decisions. We are confident that equity will do well in the long run provided you have the two key virtues needed in such times - patience and courage to buy when there is blood on the streets.

Since the future will always be uncertain, psychology and sentiment often dominate economic fundamentals in the short term, but in the long run, fundamentals will take center stage and markets should look up to reasonably higher levels from where we are.

- Amar Pandit

Reliance Growth buys media, mfg; sells metal, auto
2008-02-09 15:31:06
Reliance Growth Fund augmented its exposure to the media, manufacturing, and banking pack, while pared its weightage to metal, auto, services, IT and foods & beverages. (See more - What is Reliance Growth Fund buying/selling?)

The analysis of the scheme for January 2008, shows that in the media pack, it introduced NDTV. It purchased Jain Irrigation and Bombay Dyeing in the manufacturing sector. In the banking pack, it introduced Indiabulls Financial and sold Bank of Baroda.

In the metal pack, it bought JSW Steel but sold Jindal Saw, Gujarat Mineral and exited Ashapura Minchem. It sold Maruti Suzuki and exited Escort in the auto sector.

The scheme has sold Bharti Shipyard and Adani Enterprises in the service sector. In the IT pack, it sold Northgate Tech and Infosys. It also sold food and beverages stock Radico Khaitan.

Divis Labs, Jaiprakash Associates and Jindal Saw were the top stocks held by the scheme in December. Metal (13.19%), manufacturing (5.85%) and pharma (5.65%), were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by Reliance Growth Fund).

The equity exposure of the scheme has dropped from 66.92% to 62.97%. The total assets managed by the scheme over the month were Rs 5612.62 crore as on January 31, 2007.

Over the year, Reliance Growth Fund has yielded 38.1% returns as against 27.91% yielded by its benchmark BSE 200 as on February 7, 2008.

Tata Infrastructure picks Unitech; dumps HCC, Airtel
2008-02-09 15:44:23
Tata Infrastructure Fund was seen accumulating largecap stocks as stocks fell more than 25-35% from their highs in January. Markets crash last month on the back of sell off across the globe.

The scheme made huge buying into banking, oil, metal and cement & construction sectors. It increased its weightage to the banking and oil sectors while reduced exposure to the engineering, telecom and utilites sectors. (View - What is Tata Infrastructure Fund buying / selling?)

The scheme increased exposure to banking space as it bought 3.5 lakh shares of ICICI Bank, 2.7 lakh shares of PNB, 1.65 lakh shares of Bank of Baroda and made fresh entry into Kotak Mahindra Bank and Axis Bank with 0.76 lakh and 0.65 lakh shares, respectively. The BSE Bankex fell over 7% in January.

BSE Oil and Gas index lost nearly 20% during January. It raised investment in the sector by introducing 22.16 lakh shares of Cairn India and adding to its investments in ONGC and Reliance Industries.

The sell off also provided a lot of opportunities in the infrastructure and construction space, wherein the scheme bought 2.36 lakh shares of GMR Infrastructure, 1.38 lakh shares of Nagarjuna Const, 1.06 lakh shares of Jaiprakash Associates and made fresh entry into Unitech with 4.87 lakh shares. However, it has exited HCC.

In the metal sector, the scheme has purchased shares of India’s largest steel companies, including SAIL and Tata Steel. It bought 2.5 lakh shares and 1.6 lakh shares respectively. It also purchased 3.5 lakh shares of Usha Martin. However, it has offloaded complete stake in JSW Steel. Meanwhile, the overall weightage to the sector has gone down owing to the decline in share prices. The BSE Metal index slipped over 24%.

In the casting and forging space, it has bought 2.5 lakh shares of Electrosteel Castings. In the telecom space, it showed mixed trend as it bought 1.15 lakh shares of Reliance Communications while exited Bharti Airtel.

Selling was also seen in the engineering sector as it offloaded 2.1 lakh shares of Punj Lloyd, 1.10 lakh shares of Elecon Engineering and 0.9 lakh shares of ABB.

In the power sector, it has sold nearly 3 lakh shares of India’s largest power generation company, NTPC and in the diversified space, the scheme has exited Grasim Industries. In the gas transmission and distribution space, it has sold 4 lakh shares of Gujarat State Petronet.

Reliance Industries, Larsen & Toubro, and SBI were the top stocks held by the scheme in January. Engineering (22.95%), Banking (15.05%) and Metals (12.45%) were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by Tata Infrastructure Fund).

The cash exposure of the scheme has increased from 0.12% to 14.01%. The total assets managed by the scheme were of Rs 2,666 crore as on January 31, 2008.

Over the last one year, Tata Infrastructure Fund has yielded 45.1% returns as against 19.62% yielded by its benchmark BSE Sensex as on February 7, 2008.