For those who think recession will end by 2009

BBC:UK Economy likely to see worst contraction since 1946 next year

The Centre for Economics and Business Research (CEBR) predicts the economy will shrink by 2.9% in 2009 - more than at any time since the 1940s. .. It expects consumer spending to decline and investment in business to slump.

As far as the US is concerned, the next year is going to be exceptionally bad for commercial real estate according to  Calculated Risk. My random guess is that US, UK and maybe even Japan are likely to see at least two more years of  recession. I have seen opinions which claim that even china may fall into recession by end of 2009.

What about India? In india we are not even talking about a recession. Although we have been seeing lots of job cuts and a grim picture for Indian IT. I am unable to make any confident prediction at this point about the outlook for India.
Related post: How long will the current recession last?


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Dec 27, 2008

JOB LAYOFFS in India: Jewellery industry cuts 1 lakh jobs

Earlier, the textile industry was on its way to cut around one million jobs all over India. Now the recession is showing effects on Jewellery and Gems industry.


Business Standard: Jewellery industry cuts 1 lakh jobs in India

"This is for the first time in four decades that the diamond industry is facing a severe liquidity crunch and has laid off 1,00,000 people recently," Gitanjali Group Managing Director Mehul Choksi said here.

What we are yet to see is the full impact of recession on IT jobs in India. Already there have been several layoffs. But as the recession in the west gets deeper, Indian IT companies will see an impact on orders. The outlook for Indian IT industry is quite grim.


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Dec 26, 2008

Signals of recession getting worse

The current recession (or perhaps I should now start using the word depression more often?) is apparently getting worse. Remember that since the stock market crash in January, a lot of correction has already taken place in stock markets and investor expectations all around the globe. Hence any "worse than expected" has to be really bad. Here are three signs which I see as the recession in US and Japan getting worse. UK is on the same track.


NYT: US Housing starts plunge 19%

The construction of new homes plummeted in November by the largest amount in almost a quarter-century as builders slashed production in the face of a recessionary economy.

WSJ: US Retail Sales fall more than expected
Price-slashing failed to rescue a bleak holiday season for beleaguered retailers, as sales plunged across most categories on shrinking consumer spending, according to new data released Thursday.

BBC: Japan's Industrial output fall 8% compared to the previous month
Industrial output in Japan dropped just over 8% in November compared with the previous month, the biggest fall on record, government figures show.

Another sign of worsening recession is sharp drops in crude oil prices. Crude oil dropped over 9% on this Wednesday. The reason for the current rise in Indian stock markets, despite the picture getting grim is (perhaps) an expectation of stimulus package from the government.


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Stock Recommendation: KSOILS

update:Stop loss triggered.
Net Profit: -3.7% in 1 day (loss)

The government is expected to announce further incentives package a couple of days. If that does happen, i expect stocks like KSOILS which have seen a surge in volume in the past few days will gain. Here is my planned trade (keeping a stop loss of hardly 4% !)

Buy (Current Market Price): 54.00
Target: 58.00
Stop Loss: 52.00
Maximum Hold Period:1 week

Risks: This week has seen growing signs of the recession in US getting worse. A sharp downward movement in global stock markets is likely within a couple of weeks.


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Top Liquid Funds in India

Best Liquid FundsI studied several liquid funds and their performance for the past four- five years. I have come up with the following Liquid Funds (not in any particular favorable order) which I think are quite good. None of them have ever given negative returns in any quarter (yes! in some cases Liquid Funds can give negative returns) and almost all of them are quite close or above the average good performance. If there is enough interest, i can upload actual numbers which can help you to compare later.

HDFC LIQUID FUND
BOB LIQUID FUND
CANARA ROBECO LIQUID FUND
DBS CHOLA LIQUID FUND – REGULAR
ING LIQUID FUND
LIC MF LIQUID FUND
TATA LIQUID FUND

Remarks:
  • I have not included the study of Liquid Plus Funds while performing the above study.
  • Of all the above, LIC MF Liquif Fund seems to be particularly better. I would choose this Liquid Fund as of today.
Let me remind you of a thumb rule. If you expect inflation and interest rates to increase in the near term future, that is the best time to invest in Liquid Funds. If you expect interest rates to decrease, it is a good idea to pull out of the Liquid Funds, or at least postpone new investments. Currently inflation seems to be moving downwards, and RBI obsessed with boosting growth is likely to keep revising interest rates downwards. So this is not a good time to invest in Liquid Funds.

Related posts:


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Dec 25, 2008

KS Oils: Long term Pick

Background
Investing KS OilsKS Oils Limited specialises in manufacturing and dealing in oils, vegetable oils and fats, products of plantation, soaps and allied products. The company has sown aggressive expansion strategy. This is apparent from the fact that the book value of this company has shown an average growth of over 40% in the past 5 years or so. It entered a Joint Venture in malaysia in 2007 with a 49% stake with the goal of investment and acquisition of Palm plantations and production of Palm Oil. Overall this company fits my initial filters: it has been running for more than a decade and has shown reasonable growth and expansion potential.

Financials
The stock KSOILS seems to have been extremely popular even in the 2007 bull run. However it has lost over 75% of its peak value and reached a bottom at around 30. Whether it will still drop providing a nice entry point like Rs. 30/- per stock, i really dont know. That is the reason I find it hard to make a decision of whether to invest at its current price of Rs. 55/-. Frankly i think at the price of 55/- (its current P/E ratio would be around 11) it is a reasonable deal. I will make a one more post under Stock tips when/if i decide to invest in this stock and also specific targets and stop loss that i have in mind. Till then you can have a look at its latest Price-Volume chart (automatically updated daily by Icharts)



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How to INVEST in STOCK MARKET?- A CRUDE strategy for happy investing

Where to Invest in 2009?Has the stock market crash eaten up more than 40% of your portfolio? Would you like to minimize the effects of such disasters in the coming year? Are you confused about what investment strategy to follow, where to invest in 2009, how to build your portfolio etc. In this post I will outline one simple effective investment strategy which will help you make the most of your stock market investments.


Using a 'tough criterion' for selecting stocks
Before we start discussing our basic investment strategy, it is important to fix a tough and strict criterion for selecting stocks to invest in. What criterion to use is for you to decide. But it has always helped to have a criterion in place before making an investment decision. Some criterion I or many other investors use are: The company must be running for at least past five years, must not have made a loss for two consecutive years, an average growth of at least 15% over the past five years, no history of fraud by managers, etc. etc. In order to avoid 'accidental' investing in overvalued stocks, it is also common to put a cap on P/E ratio. For e.g. I avoid investing in stocks with P/E ratio greater than 50.

Making a list of 'High Growth' stocks
If the economy is doing well, almost all stocks do well. But there are some sectors which usually perform much better than other sectors for example Steel, Real Estate, Retail, Capital Goods. Let us call such stocks belonging to such sectors as 'High Growth' stocks. Make a list of your favorite High Growth Companies and make sure to follow the strict selection criterion you have decided to follow. Be ready with this list and now lets go to the next step.

Making a list of 'Safe' stocks
There are some sectors which may not perform as well as our high growth sectors above, but they perform reasonably well even in the case of an economic downturn. For example Pharmaceutical Sector and Fast Moving Consumer Goods, Tea Companies, etc. The idea is no matter how bad the economy is, but people dont stop buying toothpastes do they? Or they dont stop buying medicines. Make a list of your favorite SAFE STOCKS again based on a strict criterion and preferably choose only market leaders.

Juggling your portfolio
If the economic outlook seems to be getting worse - then decrease the proportion of 'high growth' stocks and switch to 'safe stock'.

If the economy seems to be improving - then let your portfolio have more taste of high growth stocks.

So far so good. The main question is: how to judge if the economy is going to do well or not? there are so many indicators and numbers to watch. Unemployment, Housing data, industrial production and plus economic condition of other countries which are trading partners. Is there a simple indicator for judging where our economy is going? Hooray!! there is....

Using CRUDE OIL prices to judge the economy
The answer to the above question is 'price of CRUDE OIL'. A healthy economic activity leads to more power and fuel consumption and conversely any economic slump results in demand destruction of crude oil. Thus crude oil prices provide a litmus test to your expectations about the economy. Please also remember to take into account the fluctuations in crude oil prices caused due to changes in production or artificial reasons like cyclone, pipe burst, threat of attack on Iran, etc.

The above simple idea combined with basic investing disciplines like respecting stop losses, booking profits regularly, not ignoring fundamentals, not blindly believing stock tips will make your portfolio perform much better than before.

I wish you all the best and happy investing for the coming new year!

Best Stocks to Invest in 2009
How to invest in a recession?
Make money in the next bull run!

This post was selected for inclusion in Carnival of Personal Finance #185


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Dec 24, 2008

SBI: How to make ONLINE TERM DEPOSITS, RECURRING DEPOSITS?

SBI Savings Account Internet Banking Online Fixed Deposit
It is now extremely simple to make online fixed deposits (or term deposits) if you have 'transactions enabled' internet banking for your State Bank of India Savingws Account.

Step 1) Login to your SBI Account using your username and password.

Step 2) Click on "Requests" tab as shown below.

Step 3) Choose from an option of Term deposit (i.e fixed deposit) or Recurring Deposit or another saving Account. Then Click on Submit. Next page you see is something like this

Step 4) Enter your choices, make sure you have enough money in your account and hooray ! you are done. You will however have to visit your branch (after a day or two) to collect the 'advice' or the fixed deposit or recurring deposit certificate.

The request takes one or two days to process. After being processed, you will see a 'separate entry' of your term deposit account on the main page after logging in on your internet banking page. This process avoids the trouble of having to stand in queues or sometimes having to visit your branch twice, once for opening the term deposit account and then for collecting the certificate.


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Dec 23, 2008

Jet Airways: Investing in a Loss Making Company

update: target reached on December 24th 2008.
Net profit: +10.3% in 2 days.


Falling oil price has aroused my interest in Jet Airways. Here's my planned trade.

Jet Airways
Buy (Current Price): 165.00
Target: 182.00
Stop Loss: 149.00
Maximum Hold period: One week.

Risks: Loss making, debt ridden company heavily affected by global recession. Jet airways has expanded operations to include international flights but has never really got the returns for it due to global economic meltdown.

Positives: 'Cheap' in the sense that the stock is trading below book value. Falling ATF (Aviation Turbine Fuel) prices.

Jet Airways Price Volume Chart


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Oil again below $40 again

Looks like oil traders are having a tough time deciding whether government measures like auto bailouts will be good enough to stop the global slowdown from taking its toll on oil demand.

After rising to over $43 per barrel yesterday, it is again trading at just below $40 per barrel.


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Impact of recession on Retail Industry

After banks, steel companies, auto makers, the recession seems to have started showing its effects on Retail industry. Let us first look at some US retailers before we get to Pantaloon Retail, one of the leader retailers in Indian Market.

update: this is the latest from BBC

More than 10 national or regional retail chains risk going bust next month, insolvency experts are warning.

Circuit City (consumer electronics) has already filed for bankruptcy more than a month ago.
Reuters:
The filing comes one week after the 59-year-old retailer said it would close 155 U.S. stores, or more than one-fifth of its retail base, and cut 17 percent of its U.S. work force.

Best Buy (consumer electronics) reported a 77% drop
NYtimes:
"We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace," the chief executive, Bradbury H. Anderson, said in a statement.

Now let us look at Pantaloon Retail which is still trading at a relatively high P/E of around 25. There is no specific bad news, but already the company shows around 38% drop in the 2008 consolidated annual results declared 'long ago'.

The consolidated results for the Year ended June 30, 2008
The Group has posted a net profit after minority interest of Rs 219.30 million for the year ended June 30, 2008 as compared to Rs 355.40 million for the year ended June 30, 2007. Total Income has increased from Rs 35654.80 million for the year ended June 30, 2007 to Rs 58665.00 million for the year ended June 30, 2008.

I have no idea how the stock reached a peak of over Rs. 850 in the past one year. Pantaloon Retail is one stock which I would like to enter at a suitable point of time. Not at the current 'high price' though.


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Articles claiming RECORD LOW data

This is just for fun. Ever since the beginning of the global economic slowdown we have been reading a lot of articles which sound like "such and such data at record low.. " Here is a collection of few of them.


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Dec 22, 2008

Recession deepens in Japan

Japan, one of the leading exporters in Auto and electronics has reported a 27% fall in exports in the month of November (as compared to previous year). Interestingly, not all the export drop is due to lack of demand in US and Europe but also demand destruction in Asia. For the first time Japan reports a trade deficit (2.5 billion dollars).

Japan has recently declared it expects no growth in the whole of 2009 (basically means it expects to remain in recession for at least 4 more quarters). Interest rates in Japan are currently the lowest at 0.1%. Japanese company toyota has just reported that it expects its first operating loss EVER.


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Cairn India Limited makes New Oil and Gas discovery.

Cairn India limited is another emerging player in area of Oil exploration. Honestly I haven't done enough reading on this to write a detailed post, maybe later. However it is currently trading at a P/E ratio of 55 which suggests that its revenue generating operations have not started in full swing yet. Click here for latest P/E ratio of Cairn India Limited.

Business Standard: Cairn India makes new Oil discovery

The open hole drill stem test flowed 40 degree API oil at a stabilised rate of 500 barrels of oil per day plus 0.4 mmscfd gas on 64/64" choke from a 4m Net pay interval in the Upper Thumbli Sand. In addition 1.4m of gas pay was identified in the Akli formation at 1 247.8m MDBRT (11 53.03m TVDSS).

Shares of Cairn India were trading up nearly 5.95 percent at Rs 162 from the rpevious day’s close at the BSE.


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Views on Investing in TATA MOTORS

It seems UK govt is unlikely to pump cash into JLR anytime soon.
ET:Tata must arrange own resources for JLR: Mandelson

The company, which is seeking financial help from the government, has been backed by unions, which say that the car industry needs support 'within days'.

If you look at recent price-volume moving average chart below of tata motors , there seems to be 'growing interest' and some bullish indicators.


The main reason for the bullish sign in this stock is the sharp fall in crude oil prices and recent price cuts by auto makers in India due to falling inflation and backed by Govt incentives. The current P/E ratio of Tata Motors is around 3.6. (Click here for latest P/E ratio). As it is the stock may look attractive , especially since it appears to be traidng below its book value !. But of loss-making JLR project and delay in Nano project remain a great concern, and I personally feel that it is best to postpone any (long-term) investment plans in Tata Motors at this point.

Furthermore, oil prices may have just started their upward journey with OPEC leaders ready to make more production cuts.


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Top three signals of rising rupee versus US dollar

One month US dollar rupee rate chart
  • US has cut interest rates to record low of 0.25%
  • Falling Indian Inflation
  • FII's were net buyers for the past two days (to the tune of approximately couple of hundred crore rupees)


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Dec 19, 2008

Finally, US automakers get a bailout package

Read: WSJ

The US government has finally announced a 17.4 billion dollar package to bailout ailing US automakers GM, Chrysler and Ford. Chrysler has recently halted production at ALL its plants.


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Interest rates, Crude Oil and Deflation

Four related news all consistent with the prediction of Deflation.

  • US cuts interest rates to 0.25%. An all time low since the records began !
  • Bank of Japan cuts interest rates from an already low of 0.30% to 0.1%. Practically 0%
  • India's inflation continues the drop to 6.8%. Likely to fall below 3 to 4% level in one or two quarters especially given the fact that government is considering one more petrol-diesel price cut.
  • Crude oil suffers a sharp drop in prices last night. Currently Crude oil is trading at around $36 per barrel. This is despite a record production cut of 2.2 barrels per day by oil producing countries announced about two days ago.

Personally I consider price of crude oil as an important 'litmus test' of how well the global economy is doing. Thus yesterday's sharp drop in crude oil prices is seen by me as an 'alarm'. It is very difficult to predict how long the recession will last etc. What is easy to say is 'it is going to get worse before it gets any better'.


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Trouble for Automobile Industry

The automobile industry all over the world seems to be in deep trouble. Here are some quick facts.

  • General Motors, Chrysler, Ford (Automobile industry in US) These three companies are probably the worst hit. GM had announced last month that it will 'run out of money' in the next two quarters if conditions do not improve. Chrysler has halted production at ALL of its plants. Yes, the keyword here is ALL. This is more than just a simple production cut to cope up with the crisis. It is just matter of time that we here some 'bankruptcy' news from one of the above companies, especially since an attempt to bailout the US automobile industry has failed.
  • Tata Motors, Maruti-Suzuki (Automobile industry in India): Maruti Suzuki has reported a 27% drop in sales in the month of November (as compared to same month last year). Tata Motors is in bad shape for at least two reasons: First) Loss making Jaguar, Land Rover plants. This was simply a bad decision or at best 'bad timing'. To even think of turning these plants into profit making ventures requires more investment, which at the moment does not seem possible. These plants will continue to bleed Tata Motors. Second) Troubles for the long awaited Nano project of Tata Motors are far from over. Protests in gujarat for higher land compensation continue.
  • Honda, Toyota (Automobile industry in Japan): Honda has cut its production in North American units at least twice, slashed salaries of its top-brass by 10%. Toyota has cut output in India by 30%, and is likely to suffer a loss of billion dollars in the current quarter.
Transport and communication is the backbone of any growing healthy economy. Naturally, any economic downturn is going to have a maginified negative effect on the automobile sector. Perhaps the only silver lining for this sector is the dropping crude oil prices.


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Dec 18, 2008

Inflation continues its downfall : drops to 6.8%

Inflation in India has been cooling down ever since it peaked above 12% in Sept/Oct. One of the most important reasons behind falling inflation is falling global crude oil prices. India has recently reduced prices of petrol by Rs. 5/- per litre and diesel by Rs. 3/- per litre. This price reduction will continue push inflation downwards for the months to come. Moreover, the government has also hinted at a further price cut in petrol and diesel which could push inflation well below the RBI's target of around 5% in the coming months.

Chances of deflation have increased. The recent interest rate cut by US (now at 0.25% !) increase the chances of deflation in US.

If you are still holding onto your gold investments, NOW is the time to exit.


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OIL falls despite HUGE OPEC cut

The continuous fall of oil prices surely has started worrying the oil-producing countries. During mid 2008, Oil reached a high price of $147 per barrel. Those were the times, when people, including chief of Gazprom, had started talking about oil prices above the $200 mark. Who would have thought that just within months, economic activity in US and the whole world would deteriorate to such an extent that oil would shed over 60% of its price ! Anyway, now that oil prices are falling, we have '$30 forecasts' from Goldman Sachs, yes, the same Goldman Sachs who also had '$200 type forecasts' just a couple of months ago.
OPEC has decided to cut oil output by 2.2 million barrels per day. This is roughly 3.3% of global daily oil consumption. Now that the oil prices have fallen so low, these countries have started talking about 'fair price for oil'. Cutting output in order to push oil prices towards $80 or perhaps even $100 mark seemed to be the intention. Note that this is the largest cut in oil output. However, oil prices have fallen by over 4.5% despite this news.

Oil prices are directly related to Oil demand and Oil demand is directly related to 'economic activity'.

This further fall in oil prices is both bad news and good news at the same time. Good news, because it will boost businesses, consumer sentiment, soften the blow of recession, reduce air ticket prices, etc. etc. Bad news, because the very fact of fall in oil prices despite record cut in oil output points towards rapidly deteriorating economic conditions.


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SATYAM COMPUTERS: future outlook - down 54% on nyse

Satyam computers had recently announced its plan for acquisition of 100% stake in Maytas properties and a 51% stake in Maytas infrastructure arm. Satyam computers is also listed on New York Stock Exchange (NYSE) and the stock plunged over 54% as a reaction to this news.

Real estate in India and more generally all over the world is in bad shape. In India especially, any 'reasonable' bottom for real estate prices does not seem to have been reached. So this acquisition was bad for the future of Satyam. And before even i make this comment there is an obvious question to ask: WHY THE HELL DOES SATYAM WANT TO ACQUIRE A STAKE IN REAL ESTATE COMPANY ?

Hint: Ramalinga Raju, a cofounder of SATYAM owns a 31% stake in Maytas.

Horrible decision for investors. However, Satyam has cancelled its acquisition plans after this strong negative reaction by investors. So no large movements in Indian Stock Market expected because of the acquisition moves. The stock however has been steadily declining in value over the past couple of months. Should there be a large drop (say like 40%) on NSE (or BSE), it would be a good idea to buy this stock with the time frame of a couple of days in mind and with a stop loss of 10%. However a large drop seems unlikely now in view of this Bloomberg news.

Below is a three month price-volume Chart of Satyam Computers (automatically updated daily by Icharts).

Neither price movements or simple technical indicators, nor volume, nor fundamentals- nothing exciting in this stock. A good idea to stay away. However, should there be a large drop (say like 40%) on NSE (or BSE), it would be a good idea to buy this stock with the time frame of a couple of days in mind and with a stop loss of 10%. However a large drop seems unlikely now in view of this Bloomberg news.


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Dec 17, 2008

Is a depression imminent?

Is there a depression coming?

The US census bureau released statistics for the trade balances updated till October, 2008. In a trend that started a few months ago both US imports and US exports continue to decline. Imports declined by $2.7 billion and exports by $3.4 billion compared to September of this year. Since the US is the largest consumer of goods in the world and exports a fair bit of technology, the consequences of such a trend (if prolonged) are worth considering.


Imports falling is a sign of a combination of declining income, declining credit and negative public sentiment about the economy. The domestic US market is fuelled by debt. Without credit there is no potential for consumers running up debt which in turn implies that you can’t save demand by borrowing more. This trend is likely to continue and will impact countries like China and India negatively taking down national incomes.

Exports falling is a sign that the current credit crisis is finally beginning to affect good businesses and spreading to other parts of the world.

The key here, in my mind, is the potential for a negative feedback loop in both the US domestic market and vis a vis exporters to the US (particularly China and India).

Normally you would never be in a situation that is so far from equilibrium. But boom bust cycles have been a constant of modern market economies. This time round one had the option of easy and fraudulent credit coming to the "rescue" and inflating the bubble even further. But with immediate bailouts running out of steam and election fever in India and Obama fever in the US soon to be over I expect the next big slide to begin within the next 6 months.

Tighten your seat belts and short the market more often than not.


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Dec 12, 2008

TATA STEEL: to HOLD or to EXIT?

Fantastic upmove. Just yesterday, I had written about a possible upmove in Tata Steel. To be very honest, i did not expect a 11% upmove in one day ! Now what? I managed to buy the stock at around 204. The stock is already 220 ! An equally solid upmove was seen in Real Estate, but that is one sector I am not touching for the moment.

Should one exit or continue to hold?

There are couple of things I'll mention here.

  • At current P/E ratio of 1.6, Tata steel may look extremely attractive. But i am not sure of that. Remember the outlook for steel and real estate in medium term is unclear. Never let the rising market misleading you. Rallies can be funny. So it would be wise to stick to what you had in mind before I made yesterday's stock recommendation. I am now going to keep a trailing stop loss of 5% and will exit at 235-240. I am only looking at a profit of around 15% in this game.
  • Recently, Corus, a wholly owned Tata Steel subsidiary has asked for UK help. It is not clear how much upmove one can expect if at all this goes through (which I think is likely). In any case this should cause an upmove.


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Dec 10, 2008

Stock Recommendation: Buy Tata Steel

update : (15 Dec 08) Bought Tata Steel at 204 and sold at 225.5.
Net Profit: +10.5% in 6 days


For a long time I have waited for the current economic crisis to unfold. Have stopped trading, even stopped my SIP. Not that I think the crisis is really over, but with the current government economic package there should at least be short term respite to companies. Now, i think it is a good opportunity for investing in Tata Steel, with a time-frame of not more than one month.

Current price of Tata Steel is Rs. 196/-.

Lets look at the Price Volume chart of Tata Steel and moving averages from Icharts



There you see. two clear bullish indicators : Rise in volume and price rising above the 20 day moving average (the red line).

However, there are risks involved. The current economic crisis is not over and bad news from US about housing and employment has never stopped pouring in. Also, Tata steel is still burdened by debt arising from its Corus acquisition, and it is quite possible that if the current crisis worsens, the company will face a Liquidity crunch. It has already cut output and I would not say the outlook for the steel sector has suddenly dramatically improved. So please, keep a stop loss and respect it. Moreover book your profit once the stock rises about 10-15%.


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Dec 9, 2008

Buying Mutual Funds through SBICAP Securities

Online Trading Accounts like SBICAP Securities allow you to buy Mutual Funds units online. However, currently only the following mutual funds are available for purchase through SBICAP Seucrities. (I will keep the post updated).

  1. All products of JM Mutual Fund
  2. All products of Reliance Mutual Fund
  3. All products of SBI Mutual Fund
  4. All products of Sundaram BNP Paribas Mutual Fund
  5. All products of Tata Mutual Fund
Other than standard entry and exit loads of these mutual funds, there are no other charges. This has been confirmed by me through an email to SBICAP Securities.

It is currently not clear to me whether you can directly buy Mutual Funds and IPO directly using SBI Demat Account (without need an online trading account with SBICAP Securities).

Currently it is unclear to me whether you can directly buy the above Mutual Funds through your SBI Demat


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Dec 6, 2008

Blogging Tips for Maximising Adsense Revenue

Learn More about Full Page Ads

Do you have a blog or plan to start one? Are you looking at your blog as a source of good income? There are lots of small easy-to-implement search engine optimization tips and tricks which I am going to summarize in this post which can have a tremendous positive impact on not only the quality of your blog and blogging experience, but also result in a multiple rise in your blogging income.
Tips for writing your posts:

Content is King: This is well known. You have to write information which is useful. For this you must actually have knowledge of what you are writing, or the very least, be willing to first gather substantial knowledge before writing a post. In other words you must first have something which you would like to optimise. Let me tell you my experience. This is the third blog I have started on investing and personal finance. The first two blogs came before my actual investing experience. They were not successful and later I deleted them. But when I started this third blog, I actually had some experience, knowledge about online trading, demat accounts, mutual funds, etc. So i knew exactly what I had google searched for, what information is difficult to find, etc. That made my task of choosing the content much easier. You must know or at least be willing to find substantial information about majority of posts you write. Otherwise i think its a waste of time.

The role of Keywords: It is important to keep one or two keywords in mind while writing every post. For example, suppose you plan to write some posts on Mutual Funds. Instead of writing 10-15 general posts, each touching every aspect, it would be much much better if each post focussed on one or a group of related keywords. You must also learn to tastefully sprinkle your keywords throughout your post. The number of meaningful occurences of a keyword is extremely important in Search Engine Optimisation (SEO). Almost equally important is the number of occurences of keywords which are closely related to your chosen keyword. Here is a simple tip to get a list of keywords related to your chosen keyword: Go to Google Insights for Search. Type your keyword. At the bottom of the page, google will show you Search terms related to the keyword you typed. If a meaningful inclusion of those related keywords in your post is possible, please make an attempt. Another way to find related keywords, is to actually do google search using that keyword and variations and google will give a list at the bottom of the page. Or you simply one or two other top-ranking posts on that topic to get an idea.

Interlinking your posts: After choosing a topic, and writing different posts on it, each focussing on a group of related keywords, it is important to interlink your posts. For example, if the keyword of one of the posts appears in another, make a link. Also, you should make an attempt to make those links more meaningful. For example, if a page is pointing to a Gold-price chart make a link which says Gold Price Chart instead of something vague like "click here". When search engines analyze a page content it is possible they also analyze the content of the links provided on that page. How exactly this helps in Search Engine Optimisation is difficult to say quantitatively. But another advantage of interlinking your posts is you increase the time each visitor spends on your page. By providing relevant links, you encourage her/him to click on them and thus spend more time. Providing extremely relevant external links is also a good habit. Try to put a "Related posts" link after each well written post or you could also put it in between the post wherever relevant using "Also Read: ***" template.

Choosing a title for your posts: It is very important to choose a catchy, yet relevant title for your posts. It is important that the main keywords for your post appear in your title. It is worth spending a couple of minutes to actually think of a suitable title. The reason for this is when your post appears on google search page, the viewer is going to decide which site to click on mainly based on the title (and a short snippet below it, this google automatically selects). As an example: A title like "Make money by investing in Gold" is better than "Gold investing". It is also important to keep the title short. Because google will display your post title, ony upto a limited length on its search webpage. As an exaggerated example if your post title is "The one and only famous post which gives guidance for how to invest in gold" then probably google will just cut short and the title actually visible people doing google search will be "The one and only famous post which give guidance" the rest will be cut. Also: Do not change the title of your posts or your blog title frequently. Changing a title seems to have a negative impact on search engine ranking and may result in sudden decrease of traffic.

Tips for promoting your blog:

Submit your blog: Submitting your blog to major search engines (I would say just google and yahoo is good enough) and at least 5 to 8 top blog directories is a good idea. It is difficult for me to say how much exactly has this helped me, but I have followed these tips in first few weeks of launching my blog and initially i have recieved some flow of visitors arriving from them. Also claiming your site on Google's Webmasters tools is a good idea. There you can tell google if you are targetting an audience from a particular country or the whole world, whether you want you site indexed as www.niftyprediction.*** or simply niftyprediction.*** etc. You also get a list of top searches in which your sites have occured.

Choosing your blog's title: This is actually a very important point, and perhaps I should have written about it earlier. You have to be careful about choosing a relevant, attractive and a short title. The reason for the title to be relevant and attractive is obvious. But let me explain the importance of it being short. Earlier the title of my blog was "Blog of an Indian Investor". Note that if your blog is on Blogger for example, every post appearing on google search looks like "Your-blog-titile: your post title". Thus when i wrote a post called "NSE Holidays" the way it actually apears on search engines is "Indian Investor's Blog:NSE Holidays". This explains the importance of having a shorter blog title, it gives more space for the title of your post. So "Blog of an Indian Investor" is a bad choice as compared to "Indian Investor's Blog". Yes, i think that extra bit of space for every post helps.

Link Exchange: Try to exchange links with other blogs which focus on a similar topic. But beware! do not put any advertisement of link exchange on your blog. I think google may penalise your for it. I once put such an advertisement and as a result when i typed "link:niftyprediction.blogspot.com", there were no results. I think this was not a coincidence. Earlier there were a couple of backlinks i used to see.

Setting goals:

There are mainly two types of visitors that will visit your blog:
  1. Visitors from Search Engines: These are valuable because they are the ones who are hungry for information and most likely to click on your Google Adsense ads. Also some of them who like your blog can turn into regular visitors, thus increasing your daily traffic. It is to get these types of visitors for whom the Search Engine Optimization (SEO) is important.
  2. Regular visitors: These types of visitors get accustomed to seeing Adsense or other ads on your site and are hence less likely to contribute less as far as ad-clicks are concerned. However they are important for a number of reasons. Whatever algorithm google uses to determine the importance of a page, whether be it backlinks, or number of active feeds or whatever, it is an ever improving and a secret algorithm. But I think that the fact itself that a site has regular visitors, is likely to eventually contribute to the importance of your site in the eyes of Google. Some of these regular visitors may themselves have a blog and may provide you backlinks, others may tell their friends about your site, etc.
It is a matter of tremendous patience to start from a blog having initially no visitors and reach a stage where you have a constant flow of visitors contributing to your Google Adsense or blogging income. I suggest, in order to keep your motivation (especially for new bloggers) you set goals. For example:
  1. Goal 1: Write 25 quality posts on chosen relevant topics.
  2. Goal 2: Get 100 unique visitors to your blog. For a very new blog, this may take at least a month or two or maybe even more.
  3. Goal 3: Get to a stage where you get 10 visitors arriving from search engines.
  4. Goal 4: Get a Google Adsense account. (may require your site to be six months or older)
and so on... you can chalk out your own plan.

For me, going from zero to five daily visitors was more difficult than going from five to fifty. At the time of writing this post I am getting around 100 unique daily visitors and about 200 page views. It is a good idea to install some counters to track statistics of your website. I recommend either Statcounter.com or Sitemeter.com

Google Adsense: Placement of Ads and Optimization:
This is a whole new very important topic, as important as Search Engine Optimization, which I will deal in a later post to be written after I finish my own experimenting with Google Adsense Ad placements. Currently I my experiments have already shown some results but there are things to be done, for example the vertical ad on the right hand side of this page (at the time of writing this blog) is simply not earning any clicks at all. More on this later!.


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Dec 5, 2008

When Terrorists open educational institutions...

The problem of right wing groups in a country trying to sell their own brand of education is not unique to any single country. Even in India, we do have such instances. Campaigns directed towards projecting mythology as 'history' are typical examples and have always made me nervous and sad. The United States itself, is probably the worst affected by such types of campaigns. Anyone who has followed the "Creationism versus Evolution" debate will understand the intensity with which I say this.


Hafiz Muhammed SaeedAlthough the above problem exists in all societies, in some societies it is a bit more serious. Look at this particular example. Hafiz Muhammed Saeed. He was the head of banned terrorists organisation Lashkar-e-Taiba or LeT. Yes, banned even in Pakistan, due to US pressure after 2002. Currently he heads a new group Jamaat-ud-Dawa which he claims is involved only in 'welfare' activities like running educational institutions. He has openly invited media people even from India to come and visit his 'headquarters' and see that there are only educational institutions. Nothing else!.

What can be more dangerous than a (retired?) terrorist being involved in educating an entire group of next generation? Can you imagine what brand of education must that be and what devastating long term effects could that have on Pakistan as well as the international society?

It really bothers me to imagine that this maybe just one among several such examples. What bothers me equally perhaps is the way people choose to react to it. They simply identify people like Hafiz with a particular religion, and themselves get engaged in spreading hatred. They help Hafiz to make his brand of education more stronger and easier to sell. This is a serious international problem. I doubt naive solutions like throwing missiles at them will actually work in the long run. It might in fact make the problem even worse. What should we do when terrorists like Hafiz Saeed open educational institutions?

Related posts:
Will India attack Pakistan?


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Dec 4, 2008

Will India Attack Pakistan?

Is the Indian media overinterpreting Pranab Mukherjee's statement about not ruling out Military option? Pranab Mukherjee was specifically asked "is the military option open". Isn't is obvious that no government will rule out military option in such a situation, when specifically asked, although it may not be actually contemplating a military action? The BIG question is, would India seriously consider the Military option if Pakistani government continues with its 'inaction' and 'rhetoric' or is this merely part of 'pressure tactics'?

Zardari refuses India's demand
India, a couple of days ago gave a list of around 20 most wanted people, including the leader of banned terrorist organisation LeT and the leader of Jaish-e-Muhammed. Pakistan's president today rejected India's demand and said that it would act only after India provides evidence, and even in this case, it would not hand over the terror suspects to India but would try it in its own court.

Type of evidence India has or is gathering
The investigation of Mumbai attacks is still going on. However India has the following already.
  • Confessions made by captured terrorist Azam Amir Qasab.
  • GPS device found in Kuber, the ship used by terrrorists, which traces the route of the terrorists back to Pakistan. This is one of the strongest evidences we have.
  • Phone calls made to Pakistan from mobile phones recovered from the terrorists.
  • Intercepts of phone conversations between terrorists.
  • Ongoing investigation about the fishing trawler Kuber captured and used by terrorists. Articles like matchboxes, toothpaste etc. recovered from this trawler have been found of Pakistani origin.
If this is not enough evidence of Pakistani links of the terrorists then what is? Also, Lashkar-e-Taiba is an internationally banned terrorist organisation. Why is Pakistan protecting its chief? Remember the LeT chief Hafiz Muhammad Saeed has made public appearance in Pakistan as late as October 2008.

What is at stake if India attacks?
The decision to launch attack on Pakistan may seem natural for an angry Indian, but it is not an easy decision. It is complicated by the following.
  • Any attack will result in loss of life even on Indian side. Remember, in a war like Kargil, India lost around 800 soldiers.
  • India needs to have 'specific' information on terror camps, to actually launch a meaningful military operation. It is quite possible, that all terror suspects India needs are already in a safe haven right now, anticipating India's military action. So India cannot hope to 'kill' the terror suspects it wants Pakistan to hand it over. It can however expect to attack terror infrastructure and young-trainee-terrorists.
  • Any activity of war will have a large negative impact on the Indian Economy.
  • India and Pakistan are both nuclear countries. Any military option must be carefully calculated and care must be taken so that it does not escalate to a full fledge Nuclear war.
  • Perhaps as important as the negative impact on Indian economy of any military action, is the negative impact on Pakistani economy. This is because the more poor people in Pakistan, the more Pakistani based terrorist organisations like LeT gets 'bakras' for recruitment.
  • The change of focus of Pakistani military from its Afghan borders to Indian borders will help Taliban grow stronger. This, in the long run, is going to lead to more terrorism problems.
Any Indian Citizen, who supports India's military action against Pakistan must be aware of the above costs and difficulties.


UPDATE : Recently India has announce that it has no plans for a Military strike on Pakistan. If indeed, this terrorist attack was an attempt by Taliban, Lashkar-e-Toiba and others to divert the attention of Pak army from Pakistan-Afghanistan border to the Indian border, I fear that in situation of heightened tensions, these terrorists will try to make one more attempt. It is believed that the terrorist attack on Indian Parliament in 2001 was also a (successful) attempt by the terrorists to relieve some pressure off Pak-Afghan border.


Some more remarks:
  • Indian government does not have sufficient evidence to say that Pakistan government (or army) is directly involved in these acts. However there is convincing evidence to show that Pakistani soil, terror camps in Pakistan, were used to launch attacks on India. It is Pakistan's government lack of action which is regrettable.
  • Joint India-Pakistan team for investigation is impossible due to complete lack of trust on both sides. So any suggestions in this direction amount to mere rhetoric. The lack of trust is from both sides.
If you have any interesting point to make, please spare a moment to post your opinion in a comment.

Related links:


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Dec 3, 2008

Tata Steel: 2008 Q2 consolidated results

The Group has posted a Net profit of Rs 47036.40 million for the quarter ended September 30, 2008 as compared to Rs 14895.60 million for the quarter ended September 30, 2007. Total Income has increased from Rs 325205.90 million for the quarter ended September 30, 2007 to Rs 442833.40 million for the quarter ended June 30, 2008.

On the face of it, it looks as if the net profit has increased by over 200%. But wait! read the following (from bseindia.com)
- The actuarial gains and losses on funds of employee benefits (pension plans) of Tata Steel UK for the period from April 01, 2008 have been accounted in "Reserves and Surplus" in the consolidated financial statements in accordance with IFRS principles and permitted by AS21. This treatment is consistent with the accounting principles followed by Tata Steel UK and earlier by Corus Group plc. under IFRS. Had the company followed the previous practice of recognizing changes in actuarial valuations of pension plans of Tata Steel UK, in the profit and loss account, the profit from ordinary activities after exceptional items and before tax for the current quarter would have been higher by Rs 9600 million and for half year would have been lower by Rs 43,920 million.
So the this whopping 200% increase in net profit (and that too in recession times like these) is a bit misleading. There has been some change in accounting practices and so the result may be good but not as good as it appears.
However after having a superficial quick look at the Tata Steel results it appears that net sales have increased by 30% which certainly makes it a good result, I think, although not as spectacular as it may seem if one ignores that fact that they have changed some accounting practices.


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Dec 2, 2008

from Forward Contract to Futures

In this post I am going to explain the concept of a Futures contract. Just like any other investment ideas, there are three things about Futures or Options that you must understand.

  • Underlying Concepts.
  • Practical Information e.g. How to buy or sell Futures and options using your online trading account?
  • Strategies
Since this is my first post on this topic, it will only cover the "concept of a futures contract". Futures are one of the easiest to understand. It is the probably unavoidable use of jargon that makes this simple looking concept seem complicated. Let me start with

The concept of a Forward contract.
Let us understand this simple idea by an example. Suppose you are a farmer who grows wheat. Your crop will be ready after one month. Now the price of wheat is good, say Rs. 15/- per kg. But you wonder, "will I get this price after one month? It would be so nice if i could sell my wheat RIGHT NOW!". Alas, your wheat is not ready. However you manage to find a Baker, who is worried by rising prices and would like to secure his next couple of months wheat supply at the current Rs. 15/- per kg. price. So you both enter an agreement : After exactly one month, the farmer (i.e. you) will sell 100 kg. of wheat to the Baker at Rs. 15/-. In other words, you enter an agreement where you decide to trade at a pre-decided price, but not today, after a pre-decided time, in this case one month. Such an agreement is called a Forward contract. The date, after one month, at which the contract will be settled is called the expiry date or settlement date. The pre-decided price, Rs. 15/- per kg, is called the strike price.

From Forward Contract to Futures
A Futures contract in stock markets like NSE/BSE in concept is just like the Forward contract for shares or stocks except with the difference that the conditions of the contract, for example the expiry or the settlement date can only be chosen from what the exchange decides. Currently, all Futures contract expire on the last Thursday of every month. There are also other restrictions. Let me explain this with an example instead of throwing lot of words (keep the above example in mind). Suppose you decide that this is a good time to invest in a particular company say Praj Industries. Then if you buy one Futures contract of Praj Industries, at strike price of Rs. 100/- per share, which expires after one month then that would mean that you will be able to buy 1100 Praj Industries at Rs. 100/- on the settlement date, which for one month futures contract is last thursday of the current month. 1100 here is the Lot Size for Praj Industries. The exchange decides Lot sizes for every stock (and even index) futures and you cannot enter futures contract for shares "less than 1100". If you however want to 'buy more' you can buy more than one futures contract.

By now the underlying concept of a Futures contract must be clear. However you will have to read my next posts for actual practical information on buying/selling futures, options and strategies. We will come back to the above example of farmer/baker when we discuss hedging strategies.

Options Greeks

  • Option Greeks for Beginners (with free Options Calculator)
  • Option Greek Delta and Delta Neutral Options Trading Strategy
  • Option Greek Theta and its role in Options Trading Strategies
  • Option Greek Vega and implied volatility
  • Option Greek Rho - does it really matter in your Options Trading Strategies?
  • Stock Market Derivatives: Futures, Options

  • From Forward contract to Futures.
  • Stock Futures example - Futures trading basics explained.
  • Stock Options trading examples - Call Option Example and Put Option example.
  • Covered Call and Covered Put - Simplest Options trading strategy.
  • Volatility and Options Pricing - How is Option premium priced?
  • Lot Size of a Derivatives Contract - Contract Unit

  • Options Trading Basics
    In the Money Stock Options
    At the Money Stock Options
    Out of the Money Stock Options


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