Dalal Street English Magazine Preview Issue 171

8/14/2019 Dalal Street English Magazine Preview Issue 171

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Portfolio Guide

10 Aug 3 - 16, 2009Dalal Street Investment Journal www.DSIJ.in

KLG SYSTEL

KLG Systel (BSE Code 531269) is currently trading at Rs 165.20(52 week high/low Rs 471.25/47.40). KLGs principal activity is toprovide software, information technology solutions and IT enabled

services mostly to the domestic power, manufacturing and infrastructuresectors. Its a leading software development and services company providingOrganization Life Cycle Solutions. For FY09, on a consolidated basis, KLGrecorded YoY de-growth of 14 per cent and 36.60 per cent in its topline andbottomline respectively. One major reason for this de-growth in the KLGsbottomline is the rise in interest cost by 459.16 per cent that stood at Rs10.68 crore in FY09.

However, the company has been one of the beneficiaries of the orders from the state utilities and in FY09 KLG had intotality received orders worth over Rs 240 crore. In April 2009, KLG got itself empanelled as an IT implementation agencyfor three roles viz. that of system integrator, GIS solution provider, and meter data acquisition solution provider under the

Restructured Accelerated Power Development and Reforms Programme (R-APDRP) with a total outlay of Rs 50,000 crorefor the entire industry. Such development augers well for KLG as it might give a decent push to its topline in the comingperiod. As per the available information, the company has intended to buy back its outstanding FCCBs worth USD 16 mil-lion and has also reset the conversion price of these FCCBs at Rs 350 per share from its earlier price tag of Rs 400 per share.However, looking at the current market condition, we would recommend you to book profit in the counter.

A

I have a huge chunk of KLG Systel @ Rs 66. What is the futureof the company?

- Firoj Rout, Email

Q

Readers are requested to send only one company query at a time so that more people get a chance. For complaints regarding non-receiptof dividend, bonus rights and other matters investors may write to www.investor.sebi.gov.in

Company Name:

Query:

Name:

Address:

E-mail:

Vol. No. XXIV No. 17

Send in your queries:DSIJ LTD.,101 A, 1st Floor, Uttam House,69, P. D'mello Road, Near CarnacBridge, Mumbai-400009E-mail:[email protected]

STATE BANK OF TRAVANCORE

State Bank of Travancore (SBT) (BSE Code 532191) is currently trading at Rs 470.10 (adjusted for split in the ratio of

10:1) with a 52 week high/low Rs 3,598.85/176.10. SBT is an associate of the State Bank of India and a member of theState Bank Group. For FY09, SBT recorded a decent growth in its financials. During the same period, SBT recorded a

top-line and bottom-line growth of 21.26 per cent and 57.43 per cent respectively on YoY basis.Such impressive bottomline growth was mainly on account of the banks operational efficiency. The banks deposit and

advances recorded a YoY growth of 18.92 per cent and 16.26 per cent respectively. But the most fascinating fact is thatthe bank has not only managed to post such a performance but has also managed to record a decline in its gross and netNPAs.

For FY09, the bank recorded a net NPA of 0.58 per cent as against 0.95 per cent a year ago. The gross NPAsthat stood at 1.65 per cent in FY09 recorded a fall of 36 basis points over the last year. The bank seems to be wellcapitalised considering the fact that the banks capital adequacy ratio (Basel II) is 14.03 per cent as against 13.53per cent last year. On the valuation front, the counter is currently available at a P/E of 3.87x of its FY09 earnings.While looking at the P/ABV (adjusted for net NPAs) of 1.14x, our recommendation is that you should hold the counter fora longer period.

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I have bought ten shares of State Bank of Travancore (SBT) @ Rs 6,500 shares with a face value of Rs 100. Kindlysuggest whether I should hold or sell the shares.

- N Easwaran, ChennaiQ


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[ VALUE-ADDED INTERVIEWT ]

www.DSIJ.in 21Aug 3 - 16, 2009 Dalal Street Investment Journal

They were very aggressive in the mar-ket place and the stock market lostfaith in us thinking we wouldnt beable to survive. This was reflected inour price to earnings multiple drop-ping dramatically from 13 to 7 in lessthan 3 years.

What gave you the confidence to take onHindustan Lever?

We had faith in our capability. Also, products based on coconut oil

were everything for us, whereas forHindustan Lever it was a small partof their operations. Also, we knew thebusiness and had market leadership.

What lessons did you learn from thatexperience?

This experience taught us that wecan take on bigger giants if we galvaniseourselves. If you have the strength with-in you, you are not overawed by MNCsand other giants. You have to be perse-verant, despite short-term reversals.

What steps did you take to convert coconutoil into Parachute brand so that customershappily pay a premium price?

Firstly, innovation in packaging sachets, pouches, bottles and largepacks. Secondly, multiple price pointsand mass distribution. And, lastly, over-all brand creation with a combina-tion of advertising and merchandising.Parachute has become an iconic brand.

Marico today is an admired FMCG company with footprints in more than 26countries. How did this transformationhappen?

In the early 90s, we noticed someof our coconut oil products were beingsmuggled to Middle East. That gaveus a good opportunity to grow in theMiddle East market. Then our surveyin Bangladesh showed that it was avery big coconut oil market. We rep-licated there what we did in India andincreased our market share from zero

to 73 per cent in Bangladesh. Today,we are the largest Indian company in

Bangladesh in terms of turnover.

Did the Bangladesh experience help?That experience has really helped in

increasing the growth engines in theorganisation and leveraging opportuni-ties of our brands outside India. It pro-vided other learning experiences too! Forexample, catering to modern trade in theMiddle East helped us cater to evolving

modern trade in India. It also pro-vides employees good opportunities forcareer growth.

What was your strategy for the interna-tional markets?

In international markets, the firstphase was organic growth. But organicgrowth is a long drawn process. Now we are a little impatient in terms ofgrowth and started surveying marketsin Asia and Africa. We identified brandsfor acquisition through proactive target-ing and have presence spanning across26 countries in Africa and Middle East.

Marico is now moving into service - Kaya.What is the difference between managing abrand and managing a service business?

Its very different. We may be theonly FMCG company which has suc-cessfully made this transition globally.Nurturing a service brand requires dif-ferent focus. In service, we are dealingwith individual customers and individ-

ual feedback. There is active interactionand delivery of experience with one cus-

tomer at a time. In FMCG business, wemanufacture and distribute our brandsto retailers and create demand throughadvertising. We dont interact with theconsumers. We had to change our wayof advertising as our service brand didnthave the large budgets that FMCGbrands had. So more of PR and eventswere used to create awareness.

What were the learnings from your newbusiness?

When you start any new interna-tional or domestic business, you haveto remove the Escape buttons. It isthe first step to success. When we start-ed the international business, we hireda CEO though the business was notlarge. When a guy is fully responsiblefor the international business, he willconstantly look out for opportunitiesto grow that business.

On environmental issue, how bio-degrad-able is the Parachute pack?

I think thats a valid point. Plasticsadd a lot to environmental degrada-tion. We have reduced weight of thebottle to the minimum. This pro-envi-ronment initiative and investment haspaid us back financially because wehave reduced lot of weight.

Private labels are the biggest threat for anFMCG. How are you tackling this threat?

The best strategy to fight privatelabels is to have a strong brand and keep

Our experiencetaught us thatwe can take on

bigger giants if we galvaniseourselves. If you have thestrength within you, you arenot overawed by MNCs and

other giants.

Uncommon Leader


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[ ANALYSIS ]

project has been awarded in con-sortium with John Laing of UnitedKingdom and Sadbhav Engineering.The financial closure of the project isyet to be achieved.

HCCs real estate venture is led by

HCC Real Estate (HREL). Till nowcompany has only one project to itscredit that of 247 Park at VikroliMumbai which is to develop 1.8 mil-lion sq feet of commercial area spreadover three towers. Out of the total areaavailable, the company will occupy0.18 million sq feet and the rest willbe available for lease. The average leaserental in this area as of now is at Rs70 per sq feet. HREL expects to gen-erate approximately Rs 100 crore ofrevenue per annum from this project

once the total area has been leasedout. However, as of now only 50 percent of the area has been leased. Theconcerned authorities to answer ourquery on when will the project be fullyoperational were not available.

One of the most ambitious projectsHREL has undertaken is the develop-ment of a hill city called Lavasa nearPune. This is spread over an area of12,500 acres. The company has a planto develop four towns in Lavasa overthe next 12 years at a total cost outlay

of Rs 1,40,000 crore. The first in thisseries is Dasve which is expected to becompletely operational by end of 2010.This year (FY09), Lavasa Corporation,the company that is spearheading theproject, has booked its maiden revenueto the tune of Rs 212 crore. Out of thistotal revenue a major chunk was due tosale of land to institutions at an averagerate of around Rs 20 lakh per acre. Theprofit recorded from this project wasRs 123 crore.

This project has been able to attractinvestment from various financialinstitutions such as Axis Bank, Bankof India etc and the latest amongthem is Indusind Bank which hasinvested Rs 50 crore. According toback-of-envelope calculations (Rs531.25 crore invested by various insti-tutions for a 5.3125 per cent stake),the total value of the project worksout to be Rs 10,000 crore. At the endof FY09 HCC holds a 64.99 per centstake with Lavasa Corporation. The

company has plan of unlocking thevalue by selling the shares of Lavasa

Corporation to the general public anytime at the end of 2010.

Financial Performance

And Valuation

For FY09 the companys sales havegrown by just 7.5 per cent on a stand-

alone basis and profit grew by 15.2 percent on a YoY basis. Profit outpacedincrease in sales due to an improve-ment of its EBIDTA margins from11.9 per cent in FY08 to 13 per cent inFY09. This was mainly due to a reduc-tion in commodity prices and changeof project portfolio. Even during theboom years the companys sales andprofit have not moved at an astound-ing pace. HCCs revenue has beengrowing at a compounded rate of 22per cent in the last four years (between

FY05-FY09) and its profit has grown atan even slower pace of 16 per cent.

The company has achieved this slug-gish growth in its topline and bottom-line despite an increase in its total assetsby 44 per cent in the same time period.One of the reasons for its low utilisationof assets is its diversification into a sec-tor such as power which is more capitalintensive and calls for a longer gestationperiod. This has led to a lower fixedasset turnover for the company whichdeclined from 4.5 times in FY06 to 3.18times in FY09. A major part of its assetshas grown due to an increase in its debtportion which grew at a CAGR of 53per cent. At the end of FY09 the com-pany carried a total debt of Rs 2,321.8crore which translates into a debt equityratio of 2.2 times. Out of this total debt,around Rs 450 crore is towards FCCBs which the company issued in FY06to finance its expansion and workingcapital requirements. It has a conversionprice of Rs 248.08 per share and is to be

redeemed by 2011.The CMP of the companys

HCC One Year Price Graph

BSE Code: 500185CMP: Rs 111.00FV: 1Volume: 7054568Date: 24/07/2009

Financial Snapshot For FY09*PARTICULARS (Rs/Cr.)

Sales (Net) 3560.30% change from FY08 17

Net Profit 99.50

% change 15

Equity 256.32Face Value 1.00

CMP (Rs) 113.40

EPS (RS) 4.89

M-Cap 3447.95

P/E (X) 23.19

M-Cap/Sales (FY09) 0.97

Dividend (Rs) 0.80

Promoters(%) 40

Institutional (%) 34

*Figure is on consolidated basis

Ajit GulabchandCMD,HCC

Order Book Break-up (FY09)


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32 Aug 3 - 16, 2009Dalal Street Investment Journal

Market Moves

UK5.51% (3.42)

GERMANY6.72% (9.17)

TAIWAN2.40% (53.08)

JAPAN

7.39%(13.87)

S KOREA5.98%(35.53)

CHINA7.02%(88.66)

HONG KONG8.36% (40.75)8.36% (40.75)INDIA6.83% (58.92)

BRAZILBRAZIL6.35% (45.27)6.35% (45.27)

USA5.76% (3.78)

SINGAPORESINGAPORE7.84%7.84%(46.27)(46.27)

It seems that the stock markets arein a merry mood and betting onthe Indian growth story in a big

way. Ever since the announcement ofthe budget the markets have been inthe firm grip of bulls, hovering abovethe 15,000 mark that they had man-aged to reach after the election.

The BSE Sensex opened strong at14,351 points on July 16 and thengained momentum continuously toreach its peak of 15,463 points on July28 before closing at 15,331 points,thus gaining 979 points during thefortnight. In the same way, NSE Niftyopened at 4,223 points on July 16and touched its lowest level of 4,205points on the same day but then gainedmomentum to touch its highest levelof 4,599 points before closing at 4,564points, thereby gaining 394 points dur-ing the fortnight.

As far as the performance of theFIIs was concerned, they exhibited fullconfidence in the Indian stock market

with a net purchase of a whopping Rs3,215 crore. Meanwhile, the Indian

mutual funds also looked positive witha net purchase of Rs 1,346 crore dur-ing the fortnight. On the combinedturnover front of the NSE and BSEmarkets, the volume inflated in a bigway ranging between Rs 24,777 croreand Rs 28,051 crore spelling a bigpositive for the markets.

In the last fortnight, US Dow gained5.67 per cent indicating an improve-ment in the countrys economy. Thebiggest gainer of the fortnight wasHong Kongs Hangseng with a rise of8.36 per cent followed by SingaporesSTI, Japans Nikkei, Chinas ShanghaiComposite, Germanys Dax, BrazilsBovespa and South Koreas SeoulComposite with a 7.84 per cent, 7.39per cent, 7.02 per cent, 6.72 per cent,6.35 per cent and 5.98 per cent riserespectively.

On an individual level, the per-formance of 1,845 stocks appreciatedduring the trading sessions while thatof 723 stocks tumbled. As many as 37

stocks remained unchanged. As far asthe individual gainers are concerned,

Gujarat NRE Coke was the biggestgainer with a 36.79 per cent jump fol-lowed by Godrej Consumer Products,DLF, Bharat Forge and Tata Motors with 30.17 per cent, 30.02 per cent,27.25 per cent and 26.58 per cent riserespectively. On the other hand, UnionBank was the biggest loser with a 8.88per cent decline followed by Thermax,Max India, India Cement and LICHousing Finance, which declined by8.22 per cent, 7.84 per cent, 7.53 percent and 7.22 per cent respectively.

Considering the present mood ofthe markets it seems likely that thenext few days will witness a lot ofprofit booking. Also, the progress ofthe monsoon season (or rather the lackof it) could play a spoilsport in thehoneymoon of the bourses since manystates have announced that a largenumber of their districts have been hitby drought. Taking this into consider-ation, it would be best to book at leastpart of the profit. It brings to mind the

adage that is always better to have onebird in hand than two in the bush.

The past fortnight has been one of merriment with most of the scrips recording an upwardmovement but the shortage of rainfall has been a cause for concern, reports Amit Bhanot

Welcome To The Feast

Figures represent performance of indices during the fortnight. Figures in brackets represent YTD performance of indices

DS


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[ COVER STORY ]

fear makes them flee away from themarket when they should be flockingto buy.

The fundamentals of the compa-nies do not change everyday, yet theshare prices move up and down daily.

This volatility is due to the thirdE which stands for events. Eventsimpact emotions or sentiments in apositive or negative way. Not only theevents per se, but also how these arepresented by the media impact thesentiments. Based on the presenta-tion and interpretation of the events,people make decisions by taking shortcuts without processing the informa-tion (known as heuristic in the behav-ioural finance) based on how quickthe information is received.

We have a herd mentality in themarket and when we dont understandanything in the market, we try to dothings that are done by majority ofthe people so that, if we go wrong,we will have the solace that everyonehas gone wrong. The effects of eventson the markets are basically short-lived, unless these have long-termimplications, says Parag S. Parikh,Chairman, Parag Parikh FinancialAdvisory Services.

Markets are rational in the long

run, however, the events and theireffects turn the market irrational inthe short run. So, if you remain ratio-nal when the markets are behavingirrationally, you can make money. Toput it simply: buy when everyone isselling, and sell when everyone is buy-ing kind of value buying. But thisis easier said than done. People arenot actually rational and the reasonis that we have a mind and a heart. We are supposed to make decisions with our mind but if decisions aremade from the heart, then they maynot be of financial interest and thatis the crux of the financial prospecttheory of behavioural finance. Gooddecisions are always made when thereis less noise, so one should not alwaysfollow the ticker and the news chan-nel, advises Parikh.

Now lets look at some of theevents which have an impact in theshort term.

MONSOON

The monsoon doesnt impact theequity markets directly, but it hasdeep implications for the growth ofeconomy. Deficient rainfall has thedouble whammy effect on the econ-omy, as it not only leads to higher

inflation, but also adversely impacts

the overall demand in the economy.Deficient rainfall results in decline inagricultural produce, which hugelyimpacts the food prices in a highlypopulated country like India, pushinginflation at higher levels. Agriculturalactivity hugely depends on good mon-soon and contributes 15 per cent tothe GDP and massive 60 per cent oftotal employment. As majority of ourpopulations earnings depend on agri-cultural activity, it directly impact theprices of commodities and indirectlyaffect demand in the country.

BUDGET

Since 1993, out of 17 occasions,market has tanked on the budgetday 11 times. This is because thecapital market players eagerly awaitthe Union budget with lot of expecta-tions. Every industry, investor or an

individual would expect the budgetto bring goodies for them. The expec-

tations are infinite but the meansto satisfy them are limited, so noteverybody can be pleased. Thus, formost of the times, large part of theseexpectations go unfulfilled.

During P Chidambarams dream

budget of 1997, the markets roseby an impressive 6.53 per centon the budget day, which is high-est rise in the last 17 years. Thebudget laid down the road map foreconomic reforms in India, lower-ing income tax rates, removing sur-charge on corporate tax and reducingcorporate tax rates. However, asexplained earlier, the impact of thebudget has always been short-lived onthe market.

ELECTIONS

When the Lok Sabha Electionsresults were announced, the market went euphoric and rose by whop-ping 17.34 per cent and hit theupper circuit after the ruling UnitedProgressive Alliances (UPA) returnedto power. The UPA winning by aclear majority meant political stabil-ity at the Centre without the Leftparties which were perceived to beanti-reforms. The markets and most

political pundits expected that the2009 elections would throw up ahung parliament and, therefore, anunstable government at the Centre,but the election results gave a pleasantsurprise for the market and within amonth (April May 2009), it went upby 28.26 per cent. Political stability isgood for the growth of the economyand for the equity markets. However,election results earlier have not toogood for the market. Since 10th LokSabha elections, i.e. out of six elec-tions, the market has rejoiced onlytwice on the outcome of the elec-tions and been in the positive zone.Markets had gone up by 10.32 per


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Cover Story

THE TIME FACTOR

SMART STRATEGY(Gain/loss in%)

Period Ending Enter Nov End,Exit February End

February-92 59

February-93 5

February-94 33

February-95 -17

February-96 13

February-97 26

February-98 2

February-99 21

February-00 18

February-01 6February-02 8

February-03 2

February-04 12

February-05 8

February-06 18

February-07 -6

February-08 -9

February-09 -2

UNLUCKY MONTHSMonth Since 1991

Negative Returns

March 13

October 11

January 10

April 9

May 9

November 9

LUCKY MONTHSMonth Since 1991

Positive Returns

December 15

July 13

February 12

June 12

August 11September 11

We have talkeda lot about theevents and how

these impact the movement of broaderindices. Now, we will try to explore time as

an event (i.e. different months of the year) andfind out how it influences returns. For our analysis,

we took data since 1991 to understand if there are anyauspicious months when the market generally tends

to give positive returns. Out of total 222 months, therewere 125 months when the market gave positive returns.

The month of December has the distinction of outperformingall other months, it has given negative returns only three times

followed by July, which has closed below its opening on fiveoccasions. The average return for the month of December since

1991 is four per cent and if we annualize it, the return is a whopping48 per cent. In terms of negative return, it is the month of March

which seems to be the most ill-fated which has given negative returnthirteen times out of a total 19 years followed by October which hasgiven negative return for eleven years. Hence, one can draw a logicalconclusion that since October and March being the worst months in

terms of investment returns and December and February being thebest months, one can enter the market at the end of November and exitbefore March or at the end of February to get fantastic returns. Out of

eighteen times, this strategy would have given positive results 14 times,with median return of eight per cent, and annualizing it makes it a returnof 32 per cent. From the above empirical evidence, it might appear thatinvesting only for three months of a fiscal year will give decent returns toinvestors, but this may not hold true always. As can be observed in thelast three years, this strategy would have given negative returns. But thereis no harm in trying the strategy. So we tried to understand this betterreturns from numerology perspective. And this is what Swetta Jumaani,eminent Numerologist has to say Jupiter is the planet of wealth and 20thof November to 20th of December is ruled by Jupiter therefore suchgood returns in December, even 20th of February to 20th of March

is ruled by the Jupiter but in negative form therefore they have suchnegative return.The other way in which we can take time as an event is to

resort to astrological method. The formation of celestial bodiesin a definite way may prompt the market to move in a certaindirection. Vijay Kumar, an astrologer and a regular columnist withDalal Street Investment Journal (Hindi), had predicted variousevents such as fall of the market in September 2001. Oncethe Jupiter becomes weak it will have negative effect on the

stock market for medium to long term, and for shorter timeperiod, its the position of Sun and Moon that determinesthe fate of market, says Kumar.

Cover Story


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[ SPECIAL REPORT ]


cially faltering domestic demand.It is very important to note that

private consumption has taken a lot ofbeating as is reflected in the Q408-09GDP number. The private final con-sumption expenditure (PFCE) grew

by a meagre 2.7 per cent YoY in Q4,thereby dragging down the annualincrease to only 2.87 per cent. So far,there is no sign that domestic demandhas really picked up on a sustainablebasis. Increasing corporate tax collec-tion is not an indication of economicrecovery at this point in time. This isbecause, while a number of corporateshave been able to record improvedprofit margins, it has lot to do withaggressive belt-tightening measures inresponse to the difficult business envi-

ronment rather than real increase inrevenue. In fact, overall revenue grewever so slowly. This indicates that therehas not been much revival in domesticdemand as is claimed by the propo-nents of green shoots.

Now, we need to understand Indiasdeficit scenario. The following equa-tion is useful for better understanding:Fiscal deficit = primary deficit + netinterest payment

In the chart given above, the widen-ing gap between the two, therefore,

reflects the cost of Indias fiscal profli-gacy, i.e., interest payment. In the lastfinancial year, net interest payment con-stituted 59.02 per cent of Indias fiscaldeficit. For the current year, it is bud-geted to be 56.25 per cent. This meansthat more than 50 per cent of Indiasborrowing need is required to meetonly the interest obligations. While thisin itself is not a comforting signal, doesthat necessarily mean that the remain-ing amount that is borrowed is usedfor productive purpose? Not quite so.To understand this, it is important tounderstand the revenue deficit trend.Last year, the revenue deficit was closeto 74 per cent of the fiscal deficit. Forthe current year, it is budgeted at nearly71 per cent. This implies that more than70 per cent of governments borrowingwould be utilized to meet the govern-ments housekeeping expenses, leavingthe rest for investment. As a result, when the economy was growing at avery fast pace, wasteful expenditure kept

on increasing. For example, in a recentreport, the Planning Commission found

out that for every one rupee that reachesa BPL (Below Poverty Line) household,the government spends Rs 3.35 on thelogistics, resulting in a huge wastage. Asa result, after having met with all expen-ditures, theres hardly much left with thegovernment to invest gainfully.

That apart, virtually all the focus ofstimulus package (during the currentbudget) was aimed at such socially rel-evant projects. While increase in socialsector investment is praiseworthy, thefact is the growth multiplier of such

investments is much less than that ofinvestments in various areas of physicalinfrastructure.

Not surprisingly, while the recentEconomic Survey stressed the needto spend about 9 per cent of GDP oninfrastructure during the 11th FiveYear Plan (2007-2012), the envisagedinvestment in infrastructure duringthe current financial year is still lessthan 5 per cent of expected GDP. Andeven this might not materialize if thereis further strain on resources. This,in fact, is quite a possibility since thebudget makes no provision for the pro-posed Food Security Act and assumesthat current global prices of oil and fer-tilizers will not rise. Moreover, it opti-mistically projects a 15 per cent rise incorporate tax receipts, even as incometax revenue declines 9 per cent.

Clearly, there is very limited capa-bility of the government to providethe right kind of economic stimulus.In contrast, China, which recorded a

GDP growth of 7.9 per cent in Q2of 2009 was able to do so because of

the effect of huge stimulus package(about USD 579 billion). The aimof the package was to boost domesticconsumption through higher spendingon construction of highways and otherpublic works.

Hence, the domestic demand isunlikely to ratchet up the GDP growthnumber to the desired extent. Thisleaves external demand to come to therescue. And Indias export performancehas been anaemic at best ever sinceOctober last. And, during the last three

months, Indias exports in dollar termswere down by more than 30 per cent onan average. While in the month of May,the decline was marginally lower at 29per cent as compared to over 33 per centin the previous two months, the extentof decline is still very high for comfort.Going forward, it is likely to remainsoft, given the global scenario. Whilethere are some signals that the USeconomy might bottom out towards theend of 2009, a closer look at the datadoes not give confidence that there willbe a 'U'-shaped recovery. The recoveryis likely to be very slow and one cannotalso ignore the possibility of another dipgoing forward. And the less said aboutEurope, the better.

On the whole, therefore, there wouldbe enough constraints that would holdback the economy this year and evenyears to come.

(Source: RBI Handbook of Statistics and my calculation)

Kunal Kumar Kundu is theClient Operations Head of Infosys BPO.

Views expressed by the writer are his own

DS


10/14

Special Report


Its the first quarter of the new fiscaland though there is a general senseof better results from India Inc,

investors are still excited about the June

quarter results. And why wouldnt theybe when companies are posting better

than expected results. May it be Infosys,TCS, Maruti or any of these bigwigs, allhave pleasantly surprised the investorsand performed quite well. The market

too has given its due after these scripssurged on the bourses to catch up with

the valuations. In our cover story on theQ4FY09 results we had predicted thatthe June quarter results would be betterand with the initial numbers that are

pouring in, our prediction is certainlycoming true.

Ready, Steady, Go!

Special Report

JUNE QTR RESULTS

To go by corporate Indias results being posted for the first quarter of the new fiscal, itdoes seem that our economic situation is finally out of the woods. However, a lot alsodepends on how the monsoon fares, reports Kaustubh Ghotikar


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IN FOCUS

and/or overestimating rewards from an investment. One needsto be careful about this aspect of investing. By estimating therisks associated with each of the investment options, you canimprove your chances of building greater wealth.

Select Appropriate Investment OptionIn an ever-changing financial environment, it pays to invest

in smart options like mutual funds. Though investment risksand economic uncertainties can never be eliminated, profes-sional management of your money in mutual funds can helpyou tackle them more efficiently. However, to benefit fromtheir expertise to the fullest, it is necessary to invest in the righttype of fund i.e. the one whose objective matches with yours.

Focus On Tax Planning TooMany of us have the habit of investing

in a haphazard manner to save taxes. Thats

because we consider investments a burdenrather than a tool to get the best in termsof saving taxes as well as making our moneygrow. There is a need to integrate theseinvestments into your overall investmentprogramme. Besides, you need to adopta disciplined way of investing rather thaninvesting at the fag end of the year. Bydoing so, you can not only invest in theright options but also achieve your goal of investing on a regu-lar basis. After determining your overall exposure to equities,you can invest a part of it in Equity Linked Savings Schemes(ELSS) of mutual funds. Being equity-oriented funds thesehave the potential to provide better returns than most of theoptions under Section 80 C. Another notable feature is the taxefficiency in terms of returns earned through them.

Asset Allocation Is ImportantIt is quite common to see investors showing complete

disregard to their asset allocation in a bull market. Obviously,in their quest to maximise the returns, the risks associated with the portfolio imbalance are totally ignored. While anequity market requires a long-term commitment, it is equallyimportant to maintain proper asset allocation. Portfolio re-balancing is a process of bringing the different asset classes

back into a proper relationship following a significant movein one or more.

snt it strange that while most of us work hardto earn, we do not show the same intensity andseriousness at the time of investing it? No won-der many people around us delay the process ofinvesting either for the fear of losing their hard-

earned money due to wrong investment decisions or thinkingthat they do not have sufficient money to begin with. The fact,however, is that investing is an on-going process, not a one-timeactivity. Therefore, even if one doesnt have a lump sum in thebeginning, the process of capital building can be started through

small contributions. There are effective investment options likemutual funds that not only allow you to begin with a modestsum but also provide you the best in terms of variety, liquidity,flexibility, tax efficiency and professional management. Thoughinvesting is a very simple process, a haphazard approach toinvesting can be suicidal. Remember, investing money requiresplanning, perseverance and time commitment. Heres what youshould do to ensure success on a consistent basis:

Take The Right First StepDont begin investing unless you have determined your

investment objectives i.e. long-term as well as short-term ones,the right asset allocation as well as the investment vehicle toachieve each of these. Simply put, there are three steps that canhelp determine an action plan. First, begin by making a list ofpersonal and financial goals during short, medium and long-term horizons. For example, in the short term, you may wantto buy a car; in the medium term you may like to provide forchildrens education; and in the long run, retirement fundingcould be an objective. Second, you need to assess your currentposition in the financial lifecycle. Third, you must decide asto how much risk you are willing to take to earn your targetedreturns. This is critical as different financial objectives requiredifferent investments.

Try To Balance Risks And RewardsMany of us make the mistake of underestimating risks

I

Hemant RustagiCEO,Wiseinvest Advisors

An important ingredient for success in investing is not to losesight of your long-term objectives.

Also, explore other possibilities rather than abandoning yourlong-term investment plan in a hurry.

K EY POINTS

Investing Is A

Good AddictionMost people put off their investment plans due todeep-rooted fears. However, shed these off and createfor yourself the right strategy to earn rewards throughinvestments


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MUTUAL FUND DATABANK

A. EQUITY FUNDS

Scheme Name

NAV Inception Fund Size Three Six One Three Since (24/07/09) Date (Rs. Cr) Months Rank Months Rank Year Rank Years Rank Incep. Rank

Appr.* Appr.* Appr.* Appr.* Appr.*

AIG India Equity Fund - Reg - Growth 9.52 22/06/07 488.61 39.02 75 75.69 48 7.90 58 -- -- -2.31 140Birla Sun Life Dividend Yield Plus - Growth 54.89 26/02/03 255.25 37.33 88 56.83 138 28.55 1 18.2 28 30.42 12Birla Sun Life Equity Fund - Growth 204.95 27/08/98 1112.11 40.26 63 73.66 57 7.17 62 18.38 25 31.88 9Birla Sun Life Frontline Equity Fund - Growth 66.25 30/08/02 788.96 38.89 74 71.94 63 15.56 16 22.32 8 31.50 9

Birla Sun Life India GenNext Fund - Growth 17.25 05/08/05 94.77 31.38 144 52.65 147 8.15 54 16.16 44 14.72 65Birla Sun Life India Opportunities Fund - Growth 38.50 27/12/99 42.99 42.75 48 78.24 40 -3.70 134 0.68 114 5.19 112Birla Sun Life Long Term Advantage Fund - Growth 10.43 10/10/06 291.46 35.63 103 66.08 101 4.30 83 -- -- 1.52 128Birla Sun Life Long Term Advantage Fund - Sr 1 - Gr. 8.15 31/05/07 234.11 47.62 25 72.20 64 3.41 89 -- -- -9.06 153Birla Sun Life Mid Cap Fund - Growth 78.34 03/10/02 592.14 51.59 10 85.55 21 13.22 21 20.28 14 35.29 4Birla Sun Life Special Situations Fund - Growth 8.17 31/01/08 585.57 34.71 109 66.96 91 3.02 93 -- -- -12.80 158Birla Sun Life Top 100 Fund - Growth 17.19 24/10/05 348.43 31.89 138 58.43 129 9.35 43 12.77 76 15.54 60DBS Chola Contra Fund - Growth 8.75 27/02/06 9.89 40.90 57 71.91 67 -6.52 146 -0.42 119 -3.85 137DBS Chola Global Advantage Fund - Growth 9.58 30/05/05 6.28 37.25 88 55.27 144 -15.15 161 -5.71 122 -1.56 131DBS Chola Growth Fund -Growth 31.39 17/09/01 15.81 36.54 96 76.94 50 2.55 97 11.73 86 26.35 15DBS Chola Hedged Equity Fund - Growth 11.42 19/04/07 20.17 29.63 151 66.72 97 1.24 106 -- -- 6.04 108DBS Chola Midcap Fund - Growth 27.89 09/08/04 17.65 50.27 13 88.70 16 7.19 59 14.81 58 22.98 28DBS Chola Multi Cap Fund - Growth 15.73 28/01/05 19.48 39.08 76 74.58 62 -1.99 127 5.12 116 10.62 85DBS Chola Opportunities Fund - Cumulative 34.63 27/11/97 61.30 43.99 43 91.96 10 3.40 89 25.31 2 11.24 80DSP Blackrock Equity Fund - Growth 11.56 07/06/07 1231.52 35.15 107 58.79 127 9.56 42 -- -- 7.02 102DSP Blackrock India Tiger Fund - Growth 39.04 11/06/04 3320.48 34.27 110 71.72 69 5.30 69 20.94 11 30.47 8DSP Blackrock Micro Cap Fund - Regular - Growth 8.45 14/06/07 218.08 48.98 19 -- -- -6.91 145 -- -- -7.68 137DSP Blackrock Nat. Res. & New Energy Fund-Ret-Gth 10.43 25/04/08 233.15 30.39 146 66.78 94 7.08 59 -- -- 3.47 112

DSP Blackrock Opportunities Fund - Growth 62.94 16/05/00 888.46 36.96 91 68.17 87 9.39 42 15.67 49 22.15 30DSP Blackrock Small and Midcap Fund - Growth 10.67 14/11/06 617.26 45.82 32 71.74 68 7.91 52 -- -- 2.43 114DSP Blackrock Top 100 Equity Fund - Growth 77.17 10/03/03 1726.75 33.17 118 58.81 122 13.40 21 22.51 7 37.76 3DWS Alpha Equity Fund - Growth 62.47 21/01/03 164.16 26.97 151 52.03 141 1.83 95 16.48 42 32.50 5DWS Investment Opportunity Fund - Growth 30.00 29/01/04 160.33 32.04 131 59.49 121 -0.66 115 21.49 9 22.16 27Fidelity Equity Fund - Growth 24.93 16/05/05 2528.34 36.08 97 67.33 90 11.18 31 19.69 15 24.35 20Fidelity India Growth Fund - Growth 8.66 23/10/07 537.62 37.22 87 69.86 79 12.17 28 -- -- -7.90 130Fidelity India Special Situations Fund - Growth 13.32 22/05/06 1177.87 43.07 43 77.54 46 5.35 62 14.84 51 9.45 83Fortis Dividend Yield Fund - Growth 12.02 15/09/05 9.59 33.02 118 46.85 147 15.01 17 11.87 78 4.89 99Fortis Equity Fund - Growth 27.98 23/09/04 104.82 27.36 143 50.27 141 1.78 91 14.18 54 23.71 21Fortis Future Leaders Fund - Growth 6.46 02/05/06 33.48 40.30 59 61.46 107 -21.46 151 -3.15 114 -12.67 135Fortis Opportunities Fund - Growth 15.99 15/04/05 92.41 28.39 141 52.93 134 -22.73 151 4.12 111 13.15 60Fortis Sustainable Development Fund - Growth 10.46 23/04/07 13.16 32.39 122 51.61 135 12.18 26 -- -- 2.03 106Franklin India Bluechip - Growth 158.65 01/12/93 2199.40 35.28 98 72.36 65 16.23 12 18.23 22 27.91 10Franklin India Flexi Cap Fund - Growth 23.85 02/03/05 2158.26 39.46 67 75.62 53 15.90 14 15.85 42 21.85 26Franklin India High Growth Companies Fund - Growth 9.39 26/07/07 1129.41 42.19 48 79.69 38 8.89 37 -- -- -3.09 113Franklin India Opportunity Fund - Growth 25.45 21/02/00 599.65 33.60 107 66.64 88 -0.25 100 13.14 64 10.42 75Franklin India Prima Fund - Growth 189.08 01/12/93 736.63 46.89 29 78.79 41 4.75 64 8.14 92 20.66 34

Franklin India Prima Plus - Growth 162.64 29/09/94 1515.18 30.61 130 60.25 105 10.86 29 18.87 17 20.69 33Franklin India Smaller Companies Fund - Growth 10.09 13/01/06 576.72 48.25 25 83.09 28 5.21 56 6.6 96 0.26 104HDFC Capital Builder Fund - Growth 74.52 01/02/94 512.10 40.91 52 69.91 72 8.62 38 16.45 38 13.85 52HDFC Core & Satellite Fund - Growth 26.72 17/09/04 353.87 43.03 41 80.27 35 10.29 30 11.07 74 22.45 23HDFC Equity Fund - Growth 184.25 01/01/95 3870.79 45.15 33 87.92 19 18.49 9 18.95 15 22.14 23HDFC Growth Fund - Growth 60.58 11/09/00 1164.93 36.58 81 64.06 89 3.55 68 20.34 11 22.51 22HDFC Long Term Equity Fund - Growth 11.52 10/02/06 1047.83 36.35 82 61.34 97 6.13 50 9.13 80 4.19 90HDFC Mid-Cap Opportunities Fund - Growth 9.41 25/06/07 1051.44 38.29 70 64.39 88 6.70 46 -- -- -2.89 103HDFC Premier Multi - Cap Fund - Growth 20.00 20/04/05 429.95 44.07 37 76.87 45 9.12 32 14.11 50 18.23 37HDFC Top 200 - Growth 153.75 11/09/96 3689.11 43.68 37 86.06 21 20.75 8 22.96 5 25.65 12HSBC Dynamic Fund - Growth 8.41 24/09/07 277.19 23.17 132 37.72 131 -8.21 121 -- -- -9.04 112HSBC Equity Fund - Growth 85.12 10/12/02 1492.18 26.44 129 52.42 119 2.04 74 17.93 21 38.16 2HSBC India Opportunities Fund - Growth 28.09 24/02/04 348.02 27.21 126 50.29 121 -1.46 94 12.29 63 21.01 25HSBC Midcap Equity Fund - Growth 16.85 19/05/05 139.73 42.77 40 71.18 59 -3.37 99 7.2 86 13.29 46HSBC Progressive Themes Fund - Growth 11.86 23/02/06 456.28 26.87 125 49.69 121 -8.68 119 8.79 77 5.12 82HSBC Small Cap Fund - Growth 7.67 24/03/08 52.95 38.82 62 -- -- -15.81 127 -- -- -18.07 114HSBC Unique Opportunities Fund - Growth 8.65 21/03/07 287.10 33.06 98 60.99 94 -9.69 119 -- -- -6.00 103ICICI Prudential Discovery Fund - Growth 30.05 14/08/04 307.65 49.21 17 91.89 10 22.45 6 13.07 58 24.92 14

ICICI Prudential Dynamic Plan - Growth 73.92 31/10/02 1498.89 29.52 118 58.04 103 6.07 46 18.19 18 34.59 2ICICI Prudential Emerging STAR Fund - Growth 22.75 28/10/04 361.16 44.44 34 75.13 49 -12.23 121 6.11 86 18.94 29ICICI Prudential Fusion Fund - Growth 10.24 25/03/06 391.52 35.63 80 63.06 87 -4.12 100 6.52 83 0.71 89ICICI Prudential Fusion Fund - Series II - Growth 9.35 31/03/07 703.13 37.10 72 66.37 80 -7.61 113 -- -- -2.86 92ICICI Prudential Fusion Fund - Series III - Ret - Growth 9.27 15/03/08 543.88 32.62 100 61.78 87 -0.54 88 -- -- -5.43 96ICICI Prudential Growth Plan - Cumulative 104.30 09/07/98 345.37 27.35 116 59.87 90 6.42 45 14.15 45 23.64 17ICICI Prudential Power - Growth 83.76 01/10/94 682.03 33.04 95 66.79 75 6.48 43 12.55 58 15.42 37ICICI Prudential Service Industries Fund - Growth 13.28 30/11/05 360.24 37.62 68 67.89 73 -6.74 108 12 60 8.08 69IDFC Enterprise Equity Fund - Plan A - Growth 13.13 09/06/06 976.14 36.71 71 -- -- 0.65 78 -- -- 9.09 65IDFC Small & Midcap Equity Fund - Growth 11.59 07/03/08 286.73 38.84 59 -- -- 25.67 2 -- -- 11.31 52India Advantage Fund 167.56 08/08/96 499.89 -- -- 5.15 119 -43.25 122 -2.78 88 24.99 12ING C.U.B. Fund - Growth 12.44 11/09/06 34.13 49.88 15 91.98 9 -4.31 97 -- -- 7.91 66ING Contra Fund - Growth 13.49 10/03/06 11.24 46.15 27 88.15 14 16.39 7 18.76 14 9.27 61ING Core Equity Fund - Growth 29.37 06/05/99 56.99 33.20 88 66.59 74 0.38 77 13.94 48 11.11 54ING Dividend Yield Fund - Growth 14.47 24/10/05 22.81 38.07 62 64.43 76 12.52 17 17.35 24 10.35 57

(*Appreciation in %)

86 Dalal Street Investment Journal Aug 3 - 16, 2009 www.DSIJ.in

Entry loads on all mutual fund schemes removed by SEBI with effect from August 01, 2009.


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Letters to Editor


LETTEROF THE

FORTNIGHT

Subscribers can post their feedbackon Cover Page design on

www.DSIJ.in

We welcome your letters at:

101 A, 1st Floor, Uttam House, 69, P. D'mello Road,Near Carnac Bridge, Mumbai - 400009 Tel: 022-40629500

Letters may also be mailed to: [email protected]

Really very good, it conveys to us thatshare market is like a sea and it is verydifficult to find value picks, but DSIJcover shows these can be picked outwithout any difficulties

- Jitendra Sanghvi

Fantastic Design & art work. It increas-es the value of magazine. Seems ithas undergone through good thoughtprocess.

- Shyam Sundar Choudhary

Hope your small and medium sizefishes turn another Infosys, Unitech,Pantaloon Retails and create wealthfor long term investors

- S C Dasgupta

It is exciting and tempting. It speaksof the content of the main story andforces a reader to visit the main story.

- Lakshmi Kant Gupta

Feedback on Cover Page I am a fresher in investment arena, and I mostly refer to DSIJ for stock picksand information. Being an NRI, I would appreciate if you could pen down one

article related to NRI investing in stock markets, the tax structure, limitations ifany for NRIs investing in India, summary on rules and regulations for the sameand something more informative which will be useful for NRIs. Hope you willconsider the above request and publish some related article.

Vikram PatelReply: We would be publishing an article on the subject very soon.

ARTICLE ON NRI INVESTMENT

Winner of Issue No. 16 Cover Poll

Jitendra SanghviSubscription No.: 0529638

Congratulations, Jitendra Sanghviyour gift is on its way!

GIVE INFO ON BONUS & DIVIDEND

Thank you very much for the DSIJs Stock Market Book, which Ihave duly received. My hearty congratulations for bringing such anexcellent book. I have however; a suggestion to make, which I feel,would be immenslely useful to prospective investors while making theirinvestment decisions.

It would be great help to investors if you can include in your DalalStreet magazine two statements showing (1) year-wise bonuses (2) year-wise dividends over the last ten years , so that the investors can pick orchoose companies which are not only consistently giving but also givingmaximum bonuses and dividends. In these statements you can alsoinclude relevant information like face value, sales, PAT, price etc.

Vasant Mangesh Kalbag, MumbaiReply: Your suggestion is under consideration

This has reference to your article Data Bank-Updated Information appearingfrom pages 33 to 64. In this connection, please note that the data update onKotak Mahindra Bank Limited appearing on page no.47 in respect of the data

Pledged (%) is incorrect. As clearly indicated in our requisite disclosures to ethstock exchanges the promoters pledged (%) is 0.01 percent.We request you to update the information in your next issue accordingly.

Bina Chandarana, CS & Exec.VP, Kotak Mahindra Bank

Reply: We have corrected the information in the current issue. Our column gives thepromoters pledged shares as percentage of promoters holding and not total share capital.

INFORMATION UPDATED


14/14

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