Alliance Consultants – Altruistic Advisory

Your Today will define your Tomorrow

I normally don’t put dates on my articles but on this one I particularly want to put it (25
July 2009), as I believe it will be one of the most eventful ones.

The past is gone, it is history.

The future is unknown.
What you have today is the present – it is a gift.

Many of us have heard of the above lines numerous times in some form or the other.
“ But few have acted on it ” !

What’s done can not really be undone, know that, accept that. If it can be amended to
whatever extent then amend that, but that can be done only in the present and hence what
you do in the present will have a bearing of how the past shapes up into the future. Also
for the future to shape up well, you need to act today. Confused ?

I am talking about investments, silly.

Yes, we have all made some mistakes when it comes to investing, all people who invest
have done that (with varying degrees) but what’s the point over fretting on it now. Do
what is necessary to amend that investment decision, if you want to book a loss and exit it
then do it, if you want to want to average out its cost by picking things up at a lower level
then do it now. (Get some help from Alliance Consultants if you have to, call them at 990
900 8490). But for heavens sake don’t just sit tight on it and let it eat away into not just
your finances but also your health because you are worrying over it. The investment
decisions you make today, let it be based on sound fundamentals not on frivolous
promises made to you by some one who just wanted to sell a product to you and get rich
himself in the bargain. Analyse the very reasons why you are investing, understand what
is it that you are investing for, know how long you are investing for and how much you
are capable of investing, then decide on the investment decision don’t merely invest
because you have a surplus. To analyze all of this and to know why you shouldn’t invest
merely because you have a surplus call us immediately at 990 900 8490.

Once you have cleared the investments regarding the past you will be more apt to focus
about the future. Remember again that what you do today will either come to haunt you
in the future or to please. What happens then essentially depends on what you do today
and how you do it.

If tomorrow comes…
The pointers currently are in favor of a big rally in the Indian stock markets. Lets check
them out one by one.

Contact:- Premal B Thakkar M:- 990 900 8490 Email:- premalbthakkar@gmail.com

 Alliance Consultants – Altruistic Advisory

The advantage of decoupling:

If I were to give you $ 10 Mn. and was to ask you to invest that money as my fund
manager where would you put it, in a loss making company or one that is making profits
(but the profits are less than what they were last year). Naturally a profit making one,
well it’s the same story for India as well. When a global fund manager has to choose
amongst various economies to bet his money on he is naturally going to choose one
where there are returns to be earned. Thus India appears as a natural choice, cause while
its economic growth may have slowed down from 9% to 6 – 6.5% it still is a lot better
than that of the developed countries whose growth rates have fallen into the negative
territory. If we take a closer look at the companies back home well the picture is like this
“As per a study by Mint, for the quarter ended June ’09 the average profits have risen by
33%, for the 137 companies that have announced their results thus far”. Does this not
point largely towards the decoupling theory? Sensex is not the only barometer to measure
the decoupling theory. In fact it would be erroneous to do that. This is because with the
advent of technology the flow of money has been made very quick and very easy, so it is
possible that the markets take their cues from the global events and adjust to them (in
other words they are integrated with the global financial markets) but the same can not be
applied for India Inc. simply because we are not so dependent on exports like China
(dependent on export of manufactured goods), or Brazil (largely dependent on export of
minerals) or Russia (largely dependent on oil). All in all ours is one of the few large
economies in the world that would deliver some meaningful growth. And this is expected
to kick of a rally in the coming days as more investors globally take note of the India
story. Already the flow of FII in the country has increased and touched $ 6 Bn. this year
alone.

High Domestic Savings

At 38%, India’s savings ratio is the highest in the world after China but only 3.5% of
India’s total savings enters the stock market. Even if this ratio rises by a mere 50bps over
the next 12 months, another $15 bn of domestic capital could enter the stock market over
and above, say, another $10 bn of net foreign inflows (average figure for FY04-08). With
earnings growth close to zero at present and with economic growth likely to stay at a
modest 6.5% for the next 12 months, such inflows of capital into the stock market are
likely to create a valuation bubble.
Indians have been wary of the stock markets for quite some time now but this scenario is
changing, with the allocation toward equity (as a % of total savings) having gone up to
3.4% in FY08 from 0.6% in FY05. This trend might well continue into the future as the
demographics undergo a change and more younger people enter the system (60% of
population < 35) that would probably be less averse towards equity. Also a expected rise
in disposable income levels in the future would play a part in this unfolding.

Indian markets are Illiquid

The Indian market is one of the most illiquid markets amongst the major stock markets in
the world because of its low free float. The Indian market has poor liquidity (ADV 0.28%
of market cap vs 0.53% in Japan and 0.64% for China). This makes it very susceptible to
Contact:- Premal B Thakkar M:- 990 900 8490 Email:- premalbthakkar@gmail.com
 Alliance Consultants – Altruistic Advisory

rapid run-ups even if only modest amounts of capital enter the market for example the
53% rise in the Sensex in FY10 on account of $6.2 bn of net FII inflows in YTD FY10.
Hence if foreign and domestic capital continues to enter the market along the lines
highlighted above, it is almost inevitable that we will see a super bubble emerging.

At Alliance Consultants we believe in Altruistic Advisory and hence it is only fair that
before we conclude the article we also point out the factors that could prevent this bubble
from emerging.
(i) Lack of economic reforms
(ii) Return of risk aversion in the western world
(iii) The monsoon gods not favoring us and the economy not performing as is
expected. (Although so far there has been a sharp recovery in monsoon deficit
in most parts).

To conclude, what is it that you should be doing given such bright prospects for India?
Well it is simple, make a choice “TODAY”. Choose to continue to make investments in a
hap hazard manner or choose to invest more professionally by engaging our services. On
our part we assure you that we follow a very systematic process, there is a lot of research
that we do before we offer investment advice (as is evident from this article) and that we
are altruistic (selfless / unselfish) in nature and hence work in your best interest. So
carefully choose your investments and do not delay the investment process. Make
investment now because by the time you realize that you have missed the bus it will only
be too late. (And it has happened before, when we asked you to invest at 8500 – 9000
levels of the BSE 30).

So do your investments smartly today, because what you do today is going to impact you
for the rest of your life. And don’t fret over the past. Remember today is “THE
PRESENT”.

Today is the first day of the rest of your life, so choose well what you choose to do today.

Signed
Y.E.F.P. (Your Ethical Financial Planner)
Our logo – One of the many flags of Knight Templar.
"[A Templar Knight] is truly a fearless knight, and secure on every side, for his
soul is protected by the armor of faith, just as his body is protected by the armor
of steel. He is thus doubly-armed, and need fear neither demons nor men."

Contact:- Premal B Thakkar M:- 990 900 8490 Email:- premalbthakkar@gmail.com