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Name: Deepak Shenoy

Location: Bangalore, India
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Thursday, December 28, 2006
LinkFest #5 - Myths, advice, caution and all...

Let your money work for you (Equitymaster)
The three D's of investment - Diversification, Dollar Cost averaging and Discipline
are touted in this equitymaster article. I beg to differ on a few things: Don't use
"Dollar cost averaging" - Rupees are more likely all that is available to you. Cost
averaging is part of Systematic investments - but average with the right
investments, not dumb ones. Diversify, but not to the extent that your returns
are bad because of diversification - buy good companies or mutual funds. Don't
buy twenty diversified funds! That's way too much diversification for you, plus it
doesn't work really. And disciplined investing - that's very much recommended.
5 common investment myths (Personalfn)

A good article about what people tend to believe and the ground reality. That Rs.
10 is not a better buy than a Rs. 100 fund (I agree), long term is not necessarily
good, investments and risk taking abilities are individually unique, SIPs are not
necessarily good (I agree), and that you can actually diversify too much.
Unshining India, (Dhirendra Kumar, Value Research Online)

A very interesting take on how people are going berserk just led by the "India
shining" story. Everyone and his aunty is buying property because they feel that
the economy cannot go down. Led by the lucre of a booming economy, investors
are putting money down based on future calculations of income, earnings, GDP
growth, whatever - and additional fuel comes from TV channels, fund managers,
investment advisors and the like. My thumb rule for you is: When people tell you
"if you don't invest now, it'll be too late", that's the time to stop and play some
gully cricket. But read this article - I wish Kumar had expanded a little more, and
pushed his point through rather than sitting on the fence.
MF vs. Sensex, Sensex wins? (Economic Times)

Turns out mutual funds have underperformed the equity indexes this year. This is
the case with the US over the last few years too. Is India now becoming a mature
market?
Earlier Linkfests: 1, 2, 3, 4
Labels: Advice, LinkFest, MutualFunds

Deepak Shenoy 11:18 AM | 0 comments |
Mutual Fund Identification Number (MIN) now mandatory
AMFI has notified all mutual fund investors that as per enhanced KYC (Know
Your Customer) norms, a new unique identification number will be issued to
mutual fund investors. This number is called the Mutual fund Identification
Number (MIN).
From January 1 2007, any investment in a mutual fund worth over Rs. 50,000 will
need MIN information of the investors.
Does this apply to me?

If you are a mutual fund investor in Indian Mutual Funds, or will be at some time
in the future, Yes. Currently it is only mandatory for investors that investAct now,
because later when you really want to invest, the lack of a MIN will prove to be a
pain.
This also applies if you are a company or a non-individual investor (like an HUF).
How do I get this MIN thing?
1. Download the MIN application form, print it out and fill it up.
2. Second, get the following documents ready:
o A passport size photograph.
o An identity proof (PAN card, Passport, Voter ID card etc.)
(Exhaustive list provided in the application form)
o A copy of your PAN card
o An address proof (Telephone bill, passport, etc)(Exhaustive list
provided in the application form)
3. Paste the photograph on the form and sign across it.
4. Take a copy of all documents above, including the filled up form.
5. Go to an Investor Service Center and submit all these documents with the
originals. Take back the originals and your copy of the filled up form, duly
acknowledged.
6. You should get a MIN over the counter.
7. The documents will later be scrutinised and if anything is missing your MIN
will be rejected, and you'll get a letter saying so. If a MIN is rejected, any
investment made with that MIN will be cancelled and the money refunded
to you.
8. If everything is ok, you will have a permanent MIN for all future
investments.
Note that if you don't want to give the originals for over-the-counter verification,
you can produce a certified true copy. Get a copy notarised by a registered
notary, a commercial bank manager or a gazetted officer and submit that.
How much does it cost?

Nothing. It's free for now. They might decide to charge later, so it's in your
interest to get your MIN immediately.
Do I have to do this again and again for every single fund?

No. MIN is a single identification number that works with all mutual funds as per
AMFI.
Do Existing investors need to do something? Nothing if you don't plan to

invest more than Rs. 50,000 in a fund after Jan 1, 2007. If you have an SIP that
invests more than Rs. 50K per installment, you'll need a MIN. I suggest you get a
MIN anyway.
Why do I have to do this?

When I was a kid, my parents used to tell me "Don't ask questions, just do it!".
But today it's important to address the question of "Why?". The Government of
India is very worried about the fact that money laundering is becoming more and
more prevalent. Converting "black" to "white" money without paying any tax is
what many people want to do, but that is cheating the government.
What they want to do is to stop all avenues for this purpose. People have been
using cunning strategies like investing in other people's names, or using fake
names and addresses to avoid the tax man. In order to curb this, the goverment
expects all financial bodies to "know their customers" - meaning, they should
have a photo identification, address proof etc.
But this is also an inconvenience to an honest tax paying investor. So, given that
frauds happen with large amounts (typically much higher than Rs. 50,000) they
have decided to limit the MIN requirements to only investments above Rs.
50,000. Unfortunately, people are even more cunning and I am sure they will try
to invest Rs. 49,000 instead, to avoid the MIN measures - so I am definite that
the requirement will soon apply to all investors. It is in your interest to get a MIN
fast, and while it is free.
What about Non Resident Indians (NRIs)?

NRIs and Persons of Indian Origin (PIOs) can invest in Indian Mutual Funds. They
also need a MIN. Now, how can you expect NRIs to submit original documents?
And submit forms themselves?
Firstly, original documents are not needed. Get document copies signed by a
notary in your country, including address proof in the country you are in. You'll
need the notary to sign and provide his seal on the document - only registered
notaries will do.
To submit documents, have distributors in India submit on your behalf. Send the
notarized copies PLUS the filled up form to your distributor and ask them to
submit on your behalf. You don't need to give a power of attorney or any letter
for submission of documents - that can be done by anyone. Ask them to scan a
copy of the MIN document you have received and mail it to you, apart from
sending it back by post. If you need such support, let me know; I can find
someone who'll do this for you.
PIOs must provide a notarized copy of their PIO card as well. Remember to get
back a copy of the acknowledged, filled up MIN form, because you will need to
provide that along with your application for future investment in Indian mutual
funds.
Okay, I'm still confused. What to do?

Read the FAQ, and if you're still confused about something, leave me a comment.
Resources
Frequently Asked Questions (AMFI)
MIN Application Form (Individual, Non-Individual) (AMFI)
List of Investor Service Centers
Labels: Commentary, Compliance, MIN, MutualFunds

Monday, December 25, 2006
Futures and Options: An introduction
Futures and Options (F&O) is a famous phrase used by TV channels, web sites
and in conversation nowadays but many of you many not familiar with the
concept. Let me try and explain, in very simple terms.
Firstly, let me confirm what you already know: That you can buy and sell stocks
on an exchange, and prices of stocks vary every day, and perhaps every minute.
You buy a stock hoping for future appreciation, and sell when you want to exit or
book profits.
This is called the "cash" or the "spot" market - that means, when you say "I will
buy 100 shares of company X at Rs. 152" on a stock exchange, someone can sell
it to you and you will get the shares "on the spot". (Technically, you'll get
delivery after two days but that is really an administrative lag) You also pay
money "on the spot" - that is, you will need to immediately pay the Rs. 15,200 in
the example above.
Futures
Now, let me talk about the futures markets. A future is a derivative contract in
which two parties agree to buy or sell something to each other on a particular
price at a FUTURE date.
That means delivery is not immediate, it is at a much later date. And payment is
also not immediate, it is at a later date. This kind of contract is also called a
"forward contract".
Why do people do this? And how is this different from buying today?
No delivery right now

Futures are for different kinds of requirements. For instance you may not have
the money right now to buy, but you believe the price will go up. You just buy a
forward contract for a later date, and on that date you buy and IMMEDIATELY
sell, so that you will simply pocket the difference (or lose the difference if the
stock has lost money).
Short Selling
Secondly, futures can be used to "short sell". If you want to sell something you
should own it first, no? But futures are different - since they are for a later date,
you can sell something without owning it, and then buy it later! So if you believe
the price of an item is going down, you can SELL a forward contract. Since you
don't have to deliver it right now, the buyer does not care if you already have it
or not. On the later date, just buy from the market and give it to the buyer,
pocketing (or losing) the difference.
Hedging
Futures are also for "hedging". Let's say you are a rice farmer and have 1000
kilos of rice growing in your farm. You can harvest it only three months later but
right now the price is very good, nearly Rs. 20 per kilo. But you know that this
year, the rains have been kind, so every rice farmer is going to get a good crop.
So there will be too much rice in the market, and prices will come down, even as
low as Rs. 12 per kilo! What can you do?
You can't sell the rice right now, because then the buyer will say "show me the
rice" and you can't show him because you can't harvest it until three more
months. But if you don't sell right now you will lose Rs.8 per kg!
What you can do is SELL a futures contract for 1000 kilos at today's price for
three months later, Rs. 20 per kilo. Then three months later when you harvest if
the price has gone down to Rs. 12 per kilo, you sell it in the market for Rs. 12 per
kilo and make Rs. 12,000. Then you also have to sell 1000 kilos in your forward
contract at Rs. 20, but for that you simply buy from the market at Rs. 12 and give
it to the buyer at Rs. 20, making the extra Rs.8 per kilo, totally Rs.8000. Meaning
you have made Rs. 20,000 for your 1000 kilos!
You may be thinking: Why doesn't he simply give the 1000 kilos from his farm to
the buyer? Well, the buyer may be in Brazil! Market traders for commodities like
Rice can be anywhere in the world, therefore when you enter into a futures
contract on an exchange, you need not terminate it with delivery. (in India, in
most cases, you can't even if you want to). You buy and sell on the very same
exchange on the "SPOT" price on the date of delivery. Meaning, if you SOLD a
futures contract, then on the future date the exchange will assume that you will
buy at market price (spot price) and give you the difference between your future
contract price (selling price) and the spot price (buying price).
The Underlying
In the example above, what was bought/sold in the future was "RICE". This is the
"underlying" commodity being traded in the futures contract. Rice is also traded
in the "spot" market - which can be your local kirana store, or a wholesale APMC
yard or a commodity exchange (meaning, you pay and you get your goods right
now). The "underlying" can be anything - a commodity like rice, a set of company
shares, an index value, foreign currency etc.
Exchanges
Okay what if I tell you that I will buy rice at Rs.20 and the price falls to Rs. 12? I
can then run away and hide in a corner, and break my promise, because I stand
to lose Rs. 8. This is where exchanges come in.
Exchanges ensure that your contract is executed. They "assure" your contract.
So if I run away, the exchange will still make sure you get your profits. They will
chase me for the losses. (In fact a futures contract must be traded on the
exchange. If it's not, then it's just a "forward" contract)
Contract Values and Margin In order to make sure that I don't run away from
them, exchanges ask for a "margin" - a certain portion of the contract value as a
"deposit" until the contracted date. In India this is between 12 to 50% of the
contract value for shares; so if you buy a future for buying 100 Infosys shares at
Rs. 2200, the contract value is Rs. 220,000. The margin can be 20% (dictated by
your broker or the exchange) so the margin will be Rs. 44,000. You are required
to pay the margin on the day you buy or sell the futures contract. On the
contracted date (in the future), you will get back your margin plus your profit (or
minus your loss).
Mark to market
Let us assume I bought a forward contract (100 shares of INFY at current future
price of Rs. 2200 per share, on January 27, 2007) paying a margin of Rs. 44,000.
Now suddenly if there is a crash and the price of INFY in the spot market dipped
to Rs. 1700? Essentially I have lost Rs. 500 per share - which, for 100 shares, is
Rs. 50,000! This is greater than my margin of Rs. 44,000 so the broker or
exchange may still think I can run away and they will be left to cover the loss. So
they can make a "Marked to market" margin call, meaning that they will ask me
to provide the extra Rs. 6,000 as an additional margin (and maybe another
20,000 to cover a FURTHER fall in prices, that they can do).
Usually mark-to-market means the difference between the spot price and the
agreed future price - this can be positive ("Mark-to-market profit") or negative
("MTM Loss"). Futures are actively traded in the market, and the price of the
future is not decided by you - so once you have bought the future, you can SELL
the contract to someone else. Let's say the the contract I bought at Rs. 2,200 is
now trading at Rs. 2,300 instead. I can sell the contract itself, and I make the Rs.
100 as profit per share - for 100 shares, it's a Rs. 10,000 profit. The exchange will
also give me my margin back, and take a margin from the new owner of the
contract.
Square off
On the agreed date of the contract, the exchange will "square off" all contracts.
Meaning, all buyers and sellers will be paid back their margin including any
marked to market profits or minus any losses as of that date. To avoid arbitrary
dates, stock exchanges in India have only three open (purchaseable) future
contract dates - the last thursday of the current month, the last thursday of next
month and the last thursday of the month after that. These are called near
month, month+1, month+2. The square off happens at the end of that Thursday.
Options
Futures are pre-agreed contracts and the buyer MUST sell and the seller MUST
purchase. They have no choice in the matter at all, once they sign the contract
the contract has to be marked to market every day, they have to pay the margin
and they have to square off. That means both the buyer and the seller has an
OBLIGATION to square off the deal.
Now futures dealers are also quite smart - they want to make profits but they
want to reduce their losses. So there is a concept of "options" - a kind of
derivative contract which is slightly different.
The buyer of an Option has the RIGHT, but not the obligation to exercise the
contract. What does this mean? Let's say I think the Infosys share will go up next
month, but I am not sure.
Instead of buying a future, I can buy a "CALL" option, which is a "right to buy" at
a later date. If on that date the contract is favourable to me (meaning the spot
price of INFY is higher) I will purchase it and square off, resulting in a profit to
me.
If the spot price is lower than my call option price, I will "ditch" the contract, and
not exercise it...meaning I have no losses.
But then the person selling it to me must be really stupid. Because if the price is
higher, he has the OBLIGATION to sell it to me and make a loss, but if the price is
lower I don't exercise the option and he does not make a profit. So why would he
do it? He charges me a "premium" which is the amount I pay to buy the option. It
may be very cheap; about Rs. 20 per share, but that is the money for his trouble
that he gets to keep in case I decide not to exercise the option. If I decide to
exercise, he still keeps the margin, but pays the mark-to-market loss.
Calls and puts

The right to BUY an underlying stock at a certain price is known as a call option.
The right to SELL an underlying stock at a certain prices is a PUT option.
It is quite confusing. You can buy a call option, and you can buy a put option. You
have to associate the phrase "call" with "right to buy" and "put" with "right to
sell". (If you are really confused, repeat this mantra 108 times:
CALL is the right to purchase

PUT is the right to sell
)
Strike price
Now futures are traded like shares - so the price of the future is readily available
in the market, and goes up and down every day. But an option is slightly
different, because it is a right and not an obligation. You buy a future in the
futures market, based on who is willing to pay how much for a future.
But an option is always at a pre-agreed price. In stock exchanges for stocks and
indices, the exchange allows different strike prices, usually Rs. 10 between each
other, and a new list of tradeable strike prices is released everyday. These will
usually be a few priecs above the current market price, and a few prices below.
Example: If Infosys is trading at Rs. 2172 today, the exchange may allow strike
prices of Rs. 2150, 2160, 2170, 2180, 2190 and 2200. If the price goes up to
2200 the exchange may open up NEW strike prices of 2210, 2220 and 2230 (the
other ones are still available of course).
Writers
If you buy a CALL option then you buy the right to purchase something. But who
sells it to you? This other person does not have the RIGHT to sell it to you, she
has the OBLIGATION of selling it to you if you want it. This person is called a
writer. You can buy an option, but you can also WRITE an option (meaning you
are now obligated to sell it).
If you write an option you will receive the premium that the buyer will pay.
(Minus any brokerage and taxes).
Writers have a problem: They have limited profits (the margin they receive, when
the strike price is not profitable for the buyer) but unlimited risk of loss when the
strike price is profitable. That means for a call option, if the spot price is below
the strike price, the buyer will not exercise the option, therefore you only get the
premium. If the spot price is above, buyer will exercise and you pay the
difference (but keep the margin).
Let's say you buy a CALL option of 100 INFY shares from me (Rs. 2200 strike
price, Jan 07, Rs.20 premium per share). You pay me Rs. 2000 (Rs. 20 x 100
shares) as premium. If the price goes to Rs. 2,300 you will exercise the option
and I will have to pay the Rs. 100 difference per share, totally Rs. 10,000. My loss
is Rs. 8,000 because I got the 2,000 premium.
If the price goes down to Rs. 2,100, you will not exercise the option, and I will get
only Rs. 2,000, which was the premium.
Why do I write options? Because most options go unexercised! Meaning, I can

write an option today and it is quite likely that the market price will not be within
the premium so I won't have to lose money! And after all, I can write a CALL
option and BUY a future at the same time, ensuring that I make profits in the
difference. (This is also hedging)
In the money, out of the money

If a call option strike price is below the spot price, it is "in the money". Meaning, if
INFY price is Rs. 2200 and I have bought a call option for Rs. 2100, I am making
profits, so the option is "in the money".
The reverse is "out of the money" or "OTM". Meaning, if I buy a call option for a
strike price of 2100 but the current price is Rs. 2000, then I am not making
profits right now, so the option is OTM. Writers usually like to make OTM
contracts so that they are not immediately exposed to loss. (In the money
options usually trade for a big premium, so big that when you consider the
premium, you are making losses!)
Conclusion
This has been a long post and I am also tired, so I will stop here. Please post your
questions and I will try and sort out any other things I may not have mentioned,
or that are not very clear. Thanks for reading!
Labels: Futures, Options
Deepak Shenoy 6:14 PM | 6 comments |

PAN number is now mandatory
SEBI has posted a circular (MRD/DoP/Dep/SE/Cir-13/06, Sep 26 2006) that

makes a PAN card mandatory, from Jan 1, 2007, for all customers who buy or sell
stocks in Indian Stock Exchange. In addition, the PAN card must be verified by
the brokers visually - so they need to see the original PAN card, and you need to
provide them with a copy.
Now even if you don't trade regularly it is necessary for you to go to your
broker's office and provide them with a copy of your PAN card. This applies to
online trading accounts as well.
Failing to do so means you will not be allowed to trade, and your account may be
frozen post Jan 1, 2007. Please do this promptly and enjoy the holidays!
Labels: Commentary, Compliance

Wednesday, December 20, 2006
Fundas: Long Term Capital Gains
Long term capital gains (LTCG) applies when you profit from a "capital asset",
in this context meaning something that involves a long term investment, sold
after a long period of time. For stocks and mutual funds, the minimum period
between purchase and sale is 1 year. For property or most other asset types it is
three years. (If you buy and sell within this period, SHORT term capital gains
applies, that's a different concept.)
The government had decided that it will reward you for making long term
investments, so tax on long term gains is generally lower than the regular tax.
Currently long term capital gains tax is 20% or 10% or even 0%, the difference
between the three is explained below.
Capital gains is the PROFIT obtained when you buy today and sell a while later.
Therefore LTCG is the difference between the selling price and the buying price.
But you could have bought something for Rs. 10,000 in 1980 and sold today for
rs. 100,000 - have you made a profit? Not really, because Rs. 10,000 in 1980 was
a big amount of money! Inflation has reduced your profit, and in this case you
may have actually made a loss!
So the tax department allows you to "index" your purchase according to

inflation. They release a Cost Inflation Index (CII) table every year containing
an "index" value for each year - 1980 being 100, 1981 being 109, 1990 being
182 and so on. (See: http://incometaxindia.gov.in/ItInformation/CostInflation.asp)
This means something bought in 1980 for Rs. 10,000 and sold in 1990 for Rs.
20,000 does not mean Rs. 10,000 profit! The CII for 1990 (year of sale) is 182,
and CII for year of purchase is 1980. So real cost of purchase is Rs. 18200,
arrived at like this:
Rs. 10,000 x (182 divided by 100)
The real profit therefore is Rs. 1,800, and tax = 20% of that, = Rs. 360.
This concept is called "Indexation" meaning you are accounting for inflation of
your purchase value.
So if you index your purchase, government charges you 20% LTCG tax.
But what if you bought in 2003 and sold today? The CII for 2003 is 447 and this
year is 519. So if you bought for Rs. 10,000 in 2003 and sold today for Rs. 20,000
what is your "indexed" purchase value?
Indexed purchase value = Rs. 10,000 x (519 / 447) = Rs. 11,610
So you have still made a profit of approximately Rs. 8,400 and 20% of that is
payable as tax = Rs. 1,680. But there is an alternative:
The government allows you on extra benefit: If you don't want to index your
purchase, you can pay only 10% of a non indexed purchase - in this case it
means you will use a purchase price of Rs. 10,000 only. So your non indexed
profit is Rs. 10,000 and therefore LTCG tax @ 10% is Rs. 1,000 - this is a lot
lesser than the indexed gain!
Finally, if you invest in stocks or equity mutual funds, the government deducts a
"securities transaction tax" (STT) from your transaction (about 0.25% of the
entire transaction value). If you pay STT, LTCG tax is ZERO.
SO in short:
Indexed profit: 20% LTCG Tax

Non indexed profit: 10% LTCG Tax
Stocks and Equity funds where you pay STT: 0% LTCG Tax.
(Note: Why I say "where you pay STT" is - if you do not sell in an exchange or
surrender stocks in a buy back offer or surrender stocks in an ADR offer like in
Infosys recently , no STT will be paid, and therefore the 20% or 10% taxes will
apply)
Also read: http://theinvestorblog.blogspot.com/2005/11/capital-gains-tax-

primer.html
Labels: CapitalGains, IncomeTax

Tuesday, December 19, 2006
SIPs are not necessarily less risky, or better for the long
term
Systematic Investment Plans or SIPs are now touted around by mutual funds
and advisors as the best way to invest in a volatile market, and that small
investors must use that approach to enter the market. I don't particularly deny
that statement, but I feel that SIPs need a lot more history to prove themselves
in India.
Read this personalfn article for an overview of why SIPs are recommended for
investors. Very good points, mind you. But let me try and see if the results show
the same as the theory.
India has very little historical data - since most mutual funds have existed only
since 92-93. The U.S. has a far longer and perhaps richer history, so I have
chosen to look up SIPs in the U.S. market, and the SIP concept there is called
"Dollar Cost Averaging" (DCA).
Read this research paper on the subject that talks about DCA and how it
compares with three other strategies: Lumpsum investing (putting money
upfront), Buy and Hold (half in equities and half in t-bills) and Value Averaging.
The results, taken from data from 1970-1999, and also from 1950-1999 yields
interesting results. The DCA strategy performs worse than Lumpsums for both
large caps and small caps. Also, for small cap stocks, it does worse that all other
strategies!
Secondly, look at the "standard deviation", meaning the variation on either side
from the average. This is an indicator of risk, since your returns may be higher or
lower than the average by a big margin (high risk) or very less (smaller risk). The
SD for Lumpsum investing is the highest, obviously, because you are investing in
a high risk avenue (stocks) with upfront money. But DCA has a higher standard
deviation than value averaging or buy and hold too - which means, it has higher
risk than them - this, additionally, indicates that for a lower long term return, you
are taking on a higher risk.
And lastly, the paper states that SIPs are not necessarily less risky. But they may
also not appeal to the "behaviour" of the investor, which is why most SIPs are
advised. Meaning, most advisors feel that you should not attempt to time the
market and go for an SIP regardless of ups and downs, so that you don't feel
really bad if the market goes down since this strategy averages the cost of
purchase during lows.
But if you look at the returns and the risk you are taking, you may find lower
returns for higher risk using this strategy, which obviously does not help your
mood!
There are disadvantages of SIPs that very few people talk about. You need to
provide either cheques or an ECS mandate upfront to transfer a fixed amount per
month to the fund, on a fixed date. Most investors will invest in multiple funds, on
a fixed set of dates (many mutual funds only offer certain dates - 5th, 15th, 25th
etc. - for SIP investments)
The first disadvantage is that you can't easily stop one intermediate payment. I
usually tend to take holidays that are not inexpensive. So I may need money one
month to spend well, and I don't want to invest that month - stopping SIP
payments is a huge nightmare, especially if you have invested in many mutual
funds. Plus if you did stop one payment, you have to come back and restart all
your SIPs because the fund assumes you have stopped the strategy completely!
Secondly, the amount is fixed. So you can't choose to invest more when you feel
the market is undervalued, or less when you think it's overvalued. This, for an
active investor, is a problem. For instance, I have invested much more in June
2006 than in November, simply because I thought the market was better. I have
not yet invested much this month, but based on how it goes I might put in a lot
more money in the end of December. This is not available in an SIP scenario.
Thirdly, the fixed dates don't give you much of an advantage. If you are an active
investor you may want to invest ON the last thursday of the month, because that
is the day futures are exercised and you can figure out how much you want to
invest based on the rollover. Nobody offers you that facility.
Finally, there is an issue with cash flow: I personally have committments that are
either sudden or annual. Like taxes, or holidays or emergencies. I need to have
the flexibility to address investments based on my cash flow, which is not very
predictable. SIPs take away that flexibility from me.
In conclusion, I think SIPs are a good investment for many (I will post about that
later) but if you are an active investor you might want to consider some of the
negatives before you plonk a ton of future cash flow into this investment.
Labels: MutualFunds, SIP

Friday, December 15, 2006
LinkFest #4: Open Letter, Real Estate bubble, Money Today
Open letter to analysts from a harried investor (Author unknown)

A seriously hassled investor telling the TV analyst what he thinks of him. This is
quite applicable to India as well. Eventually I will provide a table of all the
recommendations by various analysts on a shared Google Spreadsheet. We will
then see the date of recommendation and the high/low prices after that -
perhaps we will be able to see if their "predictions" are anywhere close.
A new Insurance and Mutual Fund company: Bharti-AXA

A new entrant to the Indian financial world, Bharti-AXA will set up a mutual fund
AMC and an insurance company. This can result in two things: Fund manager
churn from an existing AMC if they try to grab one, and more NFOs. Let's see how
it goes.
SEBI suspends Reliance Broking arm for four months (Sify)

SEBI has uncovered some broker regulation violations by Reliance Stock and
Share Broking in 1999, when it was part of the RIL group. It has therefore
suspended it from trading for the next four months. This company is now owned
by the Anil Ambani group; and supposedly is not doing all that much business
anyhow.
Money Today: A new magazine

I picked this up at a newsstand recently and was quite surprised to see some
excellent articles. Read about their latest insurance calculator much on the lines
of my article.
Is there a bubble in real estate? (IndiaEconomy.org)

A very interesting article and discussion around whether the spurt in real estate
prices in India constitutes a bubble. The parallels with Japan, America and
indeed, earlier Indian events are quite revealing. I've commented there too.
Earlier Linkfests: 1, 2, 3
Labels: LinkFest, MutualFunds, RealEstate
Is a Rs. 10 mutual fund better than a Rs. 100 fund?
A number of people think that the unit price of a mutual fund matters when
they purchase; i.e. that a cheaper unit price is better. Why? They say that they
will get more units for the same money, and isn't that better?
"Number of units"
The "Number of units" does not matter at all. It is all about gain percentages. The
best funds have gained some 750% in five years. What does that mean? That
means if you bought that fund at Rs. 10 in 2001 its NAV will now be Rs.75 .
If you bought it at Rs. 20, NAV will be Rs. 150.
There are lots of such funds whose NAV is greater than 100 or 150 because they
have performed very well.
What's the NAV?

The total NAV, or "Net Asset Value" is a simple concept - First you get the "Net
Assets", which is the sum total of all the assets minus any liabilities of the fund.
Meaning, add the current market value of all the shares, minus any open
redemption requests and any applicable charges (like Daily fund management
fee etc.) and you get the Net Assets. Divide the Net Assets figure by the total
number of outstanding units and you get the unit price (called the "NAV Unit
Price" or simply, the NAV).
Most web sites and newspapers call the unit price "NAV". It's actually the NAV
unit price, so the phrase is confusing. Let me not confuse you any further: I will
call the total assets as the "Net Assets" and unit price as the "NAV".
Now you might think, if you have a 10,000 rupees, is it better to buy 1,000 units
of one fund quoting at Rs. 10 NAV, or 100 or those quoting at hundred? Frankly
it's dependent on how the fund performs. If the second fund grows at 20%, your
units are worth Rs. 12,000 at an NAV of Rs. 120. If the first one grows at 10%,
your units are worth Rs. 11,000 at Rs. 11 NAV. What is better? Obviously the
second one, but over here the NAVs are still Rs 11 vs. Rs. 120!
Lesser number of units is like small change

But what if you have a 1000 Rs. NAV? That's a problem, you think; if you want
2,500 rupees, you have to sell three units! That means you take out more than
you want, right? Also what if you have 1200 rupees to invest? You can only buy
one unit, right?
Wrong.
In Mutual funds you also get "fractional" units. So if you invest Rs. 1000 in HDFC
Taxsaver, whose nav is Rs. 149.44, you will get 6.692 units. (Some funds even go
to fourth decimal)
You can then sell fractional units also, like 1.212 units etc!
Growth is important, not unit price

What you care about is how much your money grows, not the number of units
you have. It is just as difficult for a Rs. 10 fund to move to Rs. 12, as it is for a Rs.
50 fund to move to Rs. 60.
Labels: Commentary, MutualFunds

Markets have crashed, where do we go from here?
The Sensex is now under 13,000, with the last three days accounting for a
1000 point drop. This is a 7% drop in three days; and with heavy volumes.
Minor correction?
Markets usually take a breather every now and then. So this could be a minor
correction. If this is the case, the markets will move up as suddenly as they
dropped. But I do not think this is the case, simply because the immediate past
does not show such a trend. Fast drops are followed by slow rises. The big factor
here is that there is a lot of fear and doubt in the minds of people, and it is
reflected in sentiments expressed in TV channels, and the fact that mutual funds
have not been buying heavily (although they have collected tons of money).
Having said that, this may be an opportunity for them to buy. So we must get
mutual fund data over the next few days to see whether they have been buying
or selling, especially the "heavy cash" funds (which have lots of money but not all
of it is invested in the market)
India Inc. slowing down?

The Central Statistical Organisation has reported that industrial growth in
October has only seen a 6.2% rise over Oct 2005. This is a matter of concern as
the growth is a lot lower than the 8-9% expected. However, the 30 November
2006 estimate still thinks India's GDP growth will be 8.9%, which is good enough.
Global cues
Other cues include the fact that the US Fed has decided to keep rates steady,
meaning they are not hiking or reducing rates. This is probably temporary, as the
recent rate hikes will most likely be compensated by a drop at some point.
Japan is expected to announce an interest rate change on Friday, and that may
be significant as their phenomenally low interest has caused a lot of institutions
to borrow from Japan and invest in emerging markets like India. If the Japanese
interest rates rise, there will be another drop in India - this will largely be
"perception" that FIIs will pull out. But they won't, because countries like India
are the only places they will get a significantly higher return than average,
therefore if anything MORE money will come in.
What should you do? For the confused investor: Hold your horses. A few days
here and there will not make a difference to you. Let this week by, and if the
market has recovered to 13,500 Sensex levels by next week, continue your
normal investment strategy.
For a value investor: Some stocks especially midcaps are quoting at extremely
low levels. Go ahead and buy them.
For a mutual fund investor: Usually crashes are accompanied by huge

redemptions. Hold for a week, and then think of purchasing new funds.
Regardless of the above, if the crash takes the sensex below 12,000, sell.
Labels: Advice, Commentary, Crash

Tax saving schemes: Wait till March 2007
The finance ministry is considered changing the tax benefits given to many
tax saving schemes (Check: Personalfn,Economic Times and My Blog)
Next year's budget may remove some of the tax exemptions provided under 80C
and reduce the personal tax rate. Moreover, some of the exemptions provided
may continue, but may be taxed on exit. So if you put in Rs. 100,000 today into a
tax saving fund, you will save Rs. 30,600 (highest bracket) tax; but if the ministry
has its way, the entire corpus will be fully taxed when you use this money,
usually unlocked three years later.
But this deal may still be worth the effort, versus "ditching" tax saving schemes
completely. Here's the logic:
Assumption 1: You have 1 lakh to invest in some tax saving investment.

Assumption 2: In three years, your money grows by 70%.
Assumption 3: FM declares that 80C investments are fully taxable on exit, and
tax rate is down to 25%. No change to Long Term Capital gains etc.
Scenario 1: You invest the 1 lakh in tax saving funds today.

Tax today: nil.
Net value after three years: Rs. 170,000 (70% in three years)
Tax if you exit: Rs. 42,500 (at 25%)
Real value to you : Rs. 127,500.
Scenario 2: You pay your tax today, and invest in a diversified fund instead.
Tax today: Rs. 30,600 (at 30.6%)

Net value today: Rs. 68,400.
Net value after three years: Rs. 116,280
Tax if you exit: Nil (no long term capital gains)
Real value to you: Rs. 116,280.
So there is a value is investing, providing the tax rate comes down to 25%.
What if tax rate stays at 30.6%, and the FM still taxes investments on exit?
Net values after three years:
Scenario 1: Rs. 117,980

Scenario 2: Rs. 116,280 (stays the same)
The difference is only Rs. 1,600! And for that difference you have to stay
invested for three years, and lock in your money. It's better then to stay away.
And as seen lately, diversified funds seem to do a better job of managing money
than tax saving funds, so you might just make this difference by higher returns.
No lock in, same returns, a much better deal in general.
The budget is usually revealed in the last week of February. You have time till
March 2007 to make your 80C investments. You may have to consider the
budget proposals carefully; Calculate whether it makes sense, and only if there is
a substantial saving, go on.
Labels: Commentary, IncomeTax, MutualFunds

LinkFest #3:Gold, and Mutual funds
India has 0.4% of the Worlds mutual fund assets (Economic Times) With about
3.41 lakh crore in assets, India's just about 0.4% of the world's assets. Less than
2% of our GDP is available in funds, so the opportunity to grow is tremendous! In
fact, just last month, 30,000 crore was invested in mutual funds.
Buy Gold? (Value Research) What's the fuss about gold, and how to invest in it.
Interestingly the author also talks about how he might earn more money if he
talked more about gold investments rather than mutual funds.
Top 10 Mutual Funds (Outlook Money)

Outlook Money researches and lists the top 10 funds bases on "RaR" - Risk
Adjusted Return. Some very good funds figure here.
Earlier LinkFests: 1, 2
Labels: Gold, LinkFest, MutualFunds
Closed ended funds: Why they are popular suddenly, and

why they are not really closed ended.
A lot of new fund offers are appearing as "Closed Ended" because of a

notification that SEBI has introduced, saying that open ended equity funds must
not charge "initial expenses" over the first five years, but offset them with entry
loads. (Read "Mutual Funds NFOs have hidden costs")
NFO expenses
What does this initial charge mean? You see all these ads on TV and on billboards
asking you to buy NFOs - these are all paid for by what is called "initial marketing
expenses". Earlier upto 6% of the funds collected could be allocated to such
expenses, but then fund asset management companies (AMCs) started appearing
with hundreds of new issues, just to get distributors more commissions. (which
are much higher than the 2.25% they get on their existing funds)
SEBI has therefore acted like a good regulator and disallowed open ended funds
from charging NFO marketing charges beyond the entry load. But if AMCs do this,
and charge 6% entry load, no one will buy! If they decide to take it up as their
own expense, they lose money. So what to do?
The best way out, for AMCs, was to use closed ended funds instead. Closed
ended funds, going by the name, are funds that, once subscribed, are closed for
fresh investments and for exits. (These kind of funds are special to India perhaps
- all U.S. funds are open ended) So it's a "closed" fund. SEBI decreed that such
funds could charge initial charges and amortise them over the period of the fund,
meaning that you as the investor pay for those ads over the three-year period of
a three year closed ended fund.
The cost of an early exit

The phrase Closed Ended is misleading. What if you invest a huge amount of
money and want it back desperately? Most closed ended funds allow you to exit
prematurely, somtimes at fixed days of the year like first five days of a calendar
quarter etc., but that exit usually comes with an exit load.
Also, SEBI has said that apart from the exit load, if you exit early, you should pay
the remaining amortised charges on the fund. Let me demonstrate with an
example.
Let's say you put in Rs. 100,000 in a 3 year closed ended NFO, which collects Rs.
100 crores. They charge 6% = 6 crores as marketing expenses. You have
therefore got 0.01% of the fund and therefore your share of the marketing
expense is Rs. 6,000. This is amortized for three years, meaning 2,000 per year.
This is adjusted, daily, in the NAV so you don't have to physically pay anyone, it
is automatically reflected in the "repurchase price".
After one year, you decide to sell. Now let's say they are very nice and charge
you zero load on exit. Because you were in there for a year, you have paid Rs.
2,000 of the amortised charges. But Rs. 4,000 is remaining! So when you sell,
they will remove Rs. 4,000 and give you the rest back. That 4,000 is 4% of your
investment! So if the fund had gone up 10%, it has now resulted in only 6% gain
for you. (Note that you can get that if you put the money in a bank deposit)
Not really closed ended

So you can exit early if you want, just that you pay a charge. Which means these
funds are not really closed ended. What they are really, are Closed Entry.
After the NFO, for the closed period, no fresh investments are allowed in the
fund.
Is "closed entry" bad for me?

What does this mean for you? Every time the market tanks or drops a lot,
investors will try to take out their money, no matter what the exit load. In open
ended funds that is usually balanced by some people trying to BUY the fund,
because they feel it will go back up. This means that some redemptions can be
met with the money coming in, so the fund manager need not sell the
investments.
But in closed ended funds there is no fresh entry, so the fund manager has to
sell. And therefore, when the markets recover, these funds underperform
because they were not able to buy or hold when the market was low!
You will see this happening with all these funds, unfortunately, and I will show
you the results after a year from today. I know there will be at least one
correction before then (it has to happen) and that will put pressure on these
funds.
Wait and Watch

I do not recommend these NFOs at all. But I think you may be able to get a good
deal when they finish their closed ended period and become open ended instead.
Let's see.
Labels: Commentary, MutualFunds

SBI One India Fund (NFO): Should you invest?
SBI MF has an new fund offer (NFO) called : SBI One India Fund.[Offer
Document]
Issue Price: Rs. 10

Minimum: Rs. 5,000 per investor.
SIP option: Not available
Entry Load: Nil at NFO, 2.25% after three years.
Exit Load: Nil. (Amortised initial expenses will be charged)
Initial expenses: 5% expected (upto 6% allowed)
The idea is that they "focus on all four regions of the country". They also invest in
ADR/GDRs and foreign securities.
I find it weird. It invests equally among Indian "regions". Meaning what? Many big
companies have a pan-India presence, but are headquartered in Mumbai or
Delhi. Are they all western companies? And what's the point of investing in a
region specific companies? Is the region a factor in performance at all? I don't
think so. Plus, what do you consider the "region" of a company that is across
India? The headquarters, perhaps?
Lets see the top companies in India and see where they are headquartered:
1. ONGC : Delhi
2. Reliance : Mumbai
3. NTPC : Delhi
4. Infosys: Bangalore
5. Bharti : Delhi
6. TCS: Mumbai
7. Reliance Comm: Mumbai
8. Wipro: Bangalore
9. ICICI Bank: Vadodara, Gujarat
10. ITC: Kolkata
11. SBI: Mumbai
12. BHEL: Delhi
In this set, 4 are in the north, 5 in the west, 2 in the south and 1 in the east. If
you take even the top 100, there will be a very uneven trend towards the north
and west. But most of these companies are pan-India companies!
The offer document says that:

Definition of Regions:
Companies of a region will be defined as those having their:
• Registered office; or
• Head Quarters; or
• Major manufacturing facility; or
• Major Revenue generating activity
In the region defined as a group of states and union territories.
This means Tata Steel can be both in Western region (since HQ is Mumbai) or in
Eastern region (Jamshedpur unit). That confuses the definition and objective of
the fund, which I think makes it exactly equal to a diversified fund. Honestly,
attempting to invest equally among regions is a ridiculous idea.
This fund is a lousy diversification concept. I'm not at all impressed, and I will
track the performance of this fund after six months to see if a) they are really
following their strategy and b) is it making better returns.
Also the fund wants to invest in ADRs, GDRs and foreign securities. Why is a "One
India" fund investing in foreign securities?
Fund structure: This is a three year closed end, and initial expenses of 6% are
amortised over the period. There is no additional entry load. You can exit earlier
than three years, but you must pay the remaining amortised value of the initial
expenses. You can't buy after the NFO for three years - I think this is not a closed
"end" fund, but a closed "entry" fund.
Benchmark: The fund benchmarks itself against the BSE 200. This is a fairly lousy
benchmark, because it has underperformed every other benchmark in existence
(BSE 100, Sensex, Nifty, NSE Junior Midcap etc.) I would request that they
compare this fund to the BSE 100 or the NSE 100 instead.
The fund house is good: SBI. But this fund adds very little value, really. Their
other funds have done very well- Magnum Global, Magnum Contra, Magnum
TaxGain - but I think they have pressure from fund management and distributors
to introduce new funds, since the new fund commissions are much more. (nearly
6% vs. 2.25%) But why should you and I pay for that?
Overall I don't see much difference in this fund from their Magnum Global Fund.
Invest in that instead.
Recommendation: Do not subscribe. After three years, you can gauge the
performance and enter when it becomes an open ended fund.
Labels: MutualFunds

Monday, December 04, 2006
HDFC 1 year 15 day deposit at 8%
I've just noticed that HDFC's Interest rates have changed recently. They offer
7% for a one year deposit, but a special rate applies for a deposit of 1 year and
15 days: 8% per year compounded quarterly.
This seems to apply only for deposits from 1 year 15 days to 1 year 16 days. If
you take a deposit of lesser days or more days (1 year 14 days or 1 year 17 days
you get only 7%!)
Labels: Commentary
Your savings may be taxed next year

An Economic Times article states that some of the 80C deductions, those that
helped you make 1 lakh of your income off the taxman's list, may now be
removed as part of the next year's budget.
...[Being reviewed] are a whole lot of tax breaks – bonus from life insurance policies;
payments from a provident fund, other statutory funds, superannuation funds; medical
insurance premia, interest on home loans; capital gains on property transfers invested in
bonds, gratuity benefits, pension benefits and so on. Sops to software developers, incentives
for backward area development are also in this hit list, though experts reckon that their
phase out is next to impossible.
The government's reasoning is simple: Make taxation more transparent and
simple, but do not affect collection of tax. This year, a huge amount of taxes
have been collected, which means more people are complying with the taxation
laws. Going forward, the government might want to cut down on the (high) tax
rates, and even bring down the highest rates from 30% down to a more
affordable rate.
But doing so means losing revenue, and money is required by the government to
build infrastructure. So a lower tax rate may mean that income tax will apply to a
lot of things that are currently out of the tax bracket. Let us see what may face
the axe, and reasoning.
Insurance premia: The reason this used to be exempt was to promote insurance.
But today most of the insurance premiums paid are for investment. Again, the
government wants to promote long term investment as well, so tax benefits were
provided if money was locked in for three years. At this point, the government
might decide to remove the investment from the tax benefit, and only provide
this for the mortality charge premiums. There may be a push to move the
investment to the EET regime (explained later).
ELSS Funds: To encourage long term equity investing and therefore build the
capital markets, tax sops are given to ELSS fund investments under 80C. Given
that there is no shortage of liquidity in either diversified or tax saving funds, or in
the market, the government might remove the ELSS scheme from 80C or make it
EET based.
Housing loan interest or principal: Interest may still be out of the taxation bracket
(it's separate from 80C) but the principal repayment is an 80C saving. That might
have to go, meaning you save tax on the interest paid but not on the principal.
This might ease the huge investments in the real estate industry, though I don't
believe tax-on-principal a big factor at the moment.
PPF and Pension plan investments: Chances are that these will stay, since they
are retirement benefits and honestly the government has done nothing to keep
you going after retirement, and has no plans to. That's why it incentivises you to
save for your own retirement, and I don't believe that should be changed.
EET means Exempt-Exempt-Taxed. This means that your investment is exempt

from tax at the point of buying in, exempt at accrual, but taxed at exit. In simple
terms it's like this. If you invest Rs. 10,000 in an 80C investment like ELSS or
Insurance, it is taken of your taxable income in the year you invest (Exempt at
Entry). Then, in the next three years, say it grows to 15,000. The 5,000 Rs.
growth is not taxed. (Exempt at Accrual). Then, if you sell the fund at say Rs.
20,000, then what is taxed is the amount of tax you saved. (Taxed at Exit)
Let's see how it goes. The EET regime was supposed to come in 2006, it's not in.
With 2007 being right in the middle of the Parliament tenure, there may be some
changes without feeling that they will lose a lot of votes (which is what drives
most policy anyhow). I do believe in the rationalisation of tax, and I hope that the
finance ministry will show the courage to reduce tax rates. If in the process we
have to lose out on some confusing tax saving schemes, so be it.
Labels: Commentary

LinkFest #2: Keeping it Simple, NFOs, Gold.
The Simple Life

(Dhirendra Kumar,Value Research Online)
Investments are about simplicity; the simpler the concept, the better it is for
investors. The author talks you through the simplest investments ("piggy banks")
and tells you why it's necessary and preferable to keep things as clear as
possible. Insurance is therefore, he says, an "unhealthy mix of insurance and
investment" - two concepts he advises you to keep separate. I cannot agree
more.
Closed Ended Funds Galore! (Economic Times)

Ever since SEBI has disallowed amortisation of initial expenses by open ended
mutual funds, AMCs have introduced (largely) only closed ended funds. Initial
expenses are chargeable by AMCs upto 6% of assets, now applicable only to
closed ended funds. AMCs are taking the opportunity to take this money
investors and hide it in smoke and mirrors; amortisation allows you to slowly take
money out in a trickle every month, and as an investor you realise only when it's
too late! Luckily SEBI says it's looking into this.
Case in point: Reliance Equity Opportunity fund had 1700+ crores subscribed in
its NFO in March 2005. Current portfolio is 1200 crores. That means 6% initial
expenses (105 cr) are now being paid by a smaller asset base, a hit of nearly 9%
at this point. No wonder the fund's not performed as well as it's peers.
Is "NEW" fashionable? (Personalfn)

The author is perplexed by the attraction to something "new" in one's portfolio.
There are good reasons why one should invest in a new fund, but a low NAV is
not one of them - in fact, the unit price should be completely ignored. It
reiterates the problem we see today; of too many similar NFOs and irrational
exuberance in purchasing them.
Should you buy Gold from your bank? (Personalfn)

Some banks seem to be overcharging for gold, and justifying it saying that they
give you a certificate for the purity of gold. But they don't seem to like their own
certificate, for they won't buy back the gold from you at all. Jewellers, branded
and unbranded, will do so and usually charge much lesser charges for the gold
itself.
New funds launched: SBI One India Fund, Reliance LT Equity Fund (review), HSBC
TaxSaver (review). Previous Linkfests: 1.
Labels: LinkFest, MutualFunds
Disclaimer: The author of this page is not a registered financial advisor, and you should not
construe anything written here to be investment advise. You should consult a qualified
broker or other financial advisor prior to making any actual investment or trading decisions.
All information is for educational and informational use only. No representation is being
made that any investment made on the basis of data or information on this blog will result in
profits. In short: Apply your own thoughts before investing; I could be wrong. I do not accept
responsibility for any losses incurred by interpretation of content in this blog.
ICICIdirect University - Equity Course Map
Next Module Previous

Module
Chapter 1
Module 4 - Basics On The stock Market.
Working of Stock Market. Concept of Margin Trading.
Indian Stock Market Overview. Types of orders.
Rolling Settlements. Circuits Filters & Trading bands.
Concept of Buying Limits. India's Unique - Badla.
What is Dematerializtion ? Securities Lending.
Going Short. Insider Trading.
Working of a stock market
To learn more about how you can earn on the stock market, one has to understand how it
works. A person desirous of buying/selling shares in the market has to first place his order with
a broker. When the buy order of the shares is communicated to the broker he routes the order
through his system to the exchange. The order stays in the queue exchange's systems and
gets executed when the order logs on to the system within buy limit that has been specified.
The shares purchased will be sent to the purchaser by the broker either in physical or demat
format
Top
Indian Stock Market Overview.
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are
the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges.
However, the BSE and NSE have established themselves as the two leading exchanges and
account for about 80 per cent of the equity volume traded in India. The NSE and BSE are equal
in size in terms of daily traded volume. The average daily turnover at the exchanges has
increased from Rs 851 crore in 1997-98 to Rs 1,284 crore in 1998-99 and further to Rs 2,273
crore in 1999-2000 (April - August 1999). NSE has around 1500 shares listed with a total
market capitalization of around Rs 9,21,500 crore (Rs 9215-bln). The BSE has over 6000
stocks listed and has a market capitalization of around Rs 9,68,000 crore (Rs 9680-bln). Most
key stocks are traded on both the exchanges and hence the investor could buy them on either
exchange. Both exchanges have a different settlement cycle, which allows investors to shift
their positions on the bourses. The primary index of BSE is BSE Sensex comprising 30 stocks.
NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE Sensex is the
older and more widely followed index. Both these indices are calculated on the basis of market
capitalization and contain the heavily traded shares from key sectors. The markets are closed
on Saturdays and Sundays. Both the exchanges have switched over from the open outcry
trading system to a fully automated computerized mode of trading known as BOLT (BSE On
Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more
efficient processing, automatic order matching, faster execution of trades and transparency.
The scrips traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The
'A' group shares represent those, which are in the carry forward system (Badla). The 'F' group
represents the debt market (fixed income securities) segment. The 'Z' group scrips are the
blacklisted companies. The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and
Rights renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories,
Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and
primary market is the Securities and Exchange Board of India (SEBI) Ltd.
Top
Rolling Settlement Cycle :
In a rolling settlement, each trading day is considered as a trading period and trades executed
during the day are settled based on the net obligations for the day. At NSE and BSE, trades in
rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the
settlement day all intervening holidays, which include bank holidays, NSE/BSE holidays,
Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on
Wednesday, Tuesday's trades settled on Thursday and so on.
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Concept Of Buying Limit
Suppose you have sold some shares on NSE and are trying to figure out that if you can use the
money to buy shares on NSE in a different settlement cycle or say on BSE. To simplify things
for ICICI Direct customers, we have introduced the concept of Buying Limit (BL). Buying Limit
simply tells the customer what is his limit for a given settlement for the desired exchange.
Assume that you have enrolled for a ICICI Direct account, which requires 100% of the money
required to fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C
and you set aside Rs 50,000 for which you would like to make some purchase. Your Buying
Limit is Rs 50,000. Assume that you sell shares worth Rs 1,00,000 on the NSE on Monday.
The BL therefore for the NSE at that point of time goes upto Rs 1,50,000. This means you can
buy shares upto Rs 1,50,000 on NSE or BSE. If you buy shares worth Rs 75,000 on Tuesday
on NSE your BL will naturally reduce to Rs 75,000. Hence your BL is simply the amount set
aside by you from your bank account and the amount realized from the sale of any shares you
have made less any purchases you have made.
Your BL of Rs 50,000, which is the amount set aside by you from your Bank account for
purchase is available for BSE and NSE. As you have made the sale of shares on NSE for
Rs.100000, the BL for NSE & BSE rises to 1,50,000. The amount from sale of shares in NSE
will also be available for purchase on BSE. ICICI Direct makes it very easy for its customers to
know their BL on the click of a mouse. You just have to specify the Exchange and settlement
cycle and on a click of your mouse, the BL will be known to you.
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What Is Dematerialization?
Dematerialization in short called as 'demat is the process by which an investor can get physical
certificates converted into electronic form maintained in an account with the Depository
Participant. The investors can dematerialize only those share certificates that are already
registered in their name and belong to the list of securities admitted for dematerialization at the
depositories.
Depository : The organization responsible to maintain investor's securities in the electronic form is
called the depository. In other words, a depository can therefore be conceived of as a "Bank" for
securities. In India there are two such organizations viz. NSDL and CDSL. The depository
concept is similar to the Banking system with the exception that banks handle funds whereas a
depository handles securities of the investors. An investor wishing to utilize the services offered
by a depository has to open an account with the depository through a Depository Participant.
Depository Participant : The market intermediary through whom the depository services can be
availed by the investors is called a Depository Participant (DP). As per SEBI regulations, DP
could be organizations involved in the business of providing financial services like banks, brokers,
custodians and financial institutions. This system of using the existing distribution channel (mainly
constituting DPs) helps the depository to reach a wide cross section of investors spread across a
large geographical area at a minimum cost. The admission of the DPs involve a detailed
evaluation by the depository of their capability to meet with the strict service standards and a
further evaluation and approval from SEBI. Realizing the potential, all the custodians in India and
a number of banks, financial institutions and major brokers have already joined as DPs to provide
services in a number of cities.
Advantages of a depository services :

Trading in demat segment completely eliminates the risk of bad deliveries. In case of transfer of
electronic shares, you save 0.5% in stamp duty. Avoids the cost of courier/ notarization/ the need
for further follow-up with your broker for shares returned for company objection No loss of
certificates in transit and saves substantial expenses involved in obtaining duplicate certificates,
when the original share certificates become mutilated or misplaced. Increasing liquidity of
securities due to immediate transfer & registration Reduction in brokerage for trading in
dematerialized shares Receive bonuses and rights into the depository account as a direct credit,
thus eliminating risk of loss in transit. Lower interest charge for loans taken against demat shares
as compared to the interest for loan against physical shares. RBI has increased the limit of loans
availed against dematerialized securities as collateral to Rs 20 lakh per borrower as against Rs
10 lakh per borrower in case of loans against physical securities. RBI has also reduced the
minimum margin to 25% for loans against dematerialized securities, as against 50% for loans
against physical securities. Fill up the account opening form, which is available with the DP. Sign
the DP-client agreement, which defines the rights and duties of the DP and the person wishing to
open the account. Receive your client account number (client ID). This client id along with your
DP id gives you a unique identification in the depository system. Fill up a dematerialization
request form, which is available with your DP. Submit your share certificates along with the form;
(write "surrendered for demat" on the face of the certificate before submitting it for demat)
Receive credit for the dematerialized shares into your account within 15 days.
Procedure of opening a demat account:

Opening a depository account is as simple as opening a bank account. You can open a
depository account with any DP convenient to you by following these steps:
Fill up the account opening form, which is available with the DP. Sign the DP-client agreement,
which defines the rights and duties of the DP and the person wishing to open the account.
Receive your client account number (client ID). This client id along with your DP id gives you a
unique identification in the depository system.
There is no restriction on the number of depository accounts you can open. However, if your
existing physical shares are in joint names, be sure to open the account in the same order of
names before you submit your share certificates for demat
Procedure to dematerialize your share certificates:
Fill up a dematerialization request form, which is available with your DP. Submit your share
certificates along with the form; (write "surrendered for demat" on the face of the certificate before
submitting it for demat) Receive credit for the dematerialized shares into your account within 15
days.
In case of directly purchasing dematerialized shares from the broker, instruct your broker to
purchase the dematerialized shares from the stock exchanges linked to the depositories. Once
the order is executed, you have to instruct your DP to receive securities from your broker's
clearing account. You have to ensure that your broker also gives a matching instruction to his DP
to transfer the shares purchased on your behalf into your depository account. You should also
ensure that your broker transfers the shares purchased from his clearing account to your
depository account, before the book closure/record date to avail the benefits of corporate action.
Stocks traded under demat:

Securities and Exchange Board of India (SEBI) has already specified for settlement only in the
dematerialized form in for 761 particular scripts. Investors interested in these stocks receive
shares only in demat form without any instruction to your broker. While SEBI has instructed the
institutional investors to sell 421 scripts only in the demat form. The shares by non institutional
investors can be sold in both physical and demat form. As there is a mix of both form of stocks, it
is possible if you have purchased a stock in this category, you may get delivery of both physical
and demat shares.
Opening of a demat account through ICICI Direct :

Opening an e-Invest account with ICICI Direct, will enable you to automatically open a demat
account with ICICI, one of the largest DP in India, thereby avoiding the hassles of finding an
efficient DP. Since the shares to be bought or sold through ICICI Direct will be only in the demat
form, it will avoid the hassles of instructing the broker to buy shares only in demat form. Adding to
this, you will not face problems like checking whether your broker has transferred the shares from
his clearing account to your demat account.
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Going Short:
If you do not have shares and you sell them it is known as going short on a stock. Generally a
trader will go short if he expects the price to decline. In a rolling settlement cycle you will have to
cover by end of the day on which you had gone short.
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Concept Of Margin Trading:
Normally to buy and sell shares, you need to have the money to pay for your purchase and
shares in your demat account to deliver for your sale. However as you do not have the full
amount to make good for your purchases or shares to deliver for your sale you have to cover
(square) your purchase/sale transaction by a sale/purchase transaction before the close of the
settlement cycle. In case the price during the course of the settlement cycle moves in your favor
(risen in case of purchase done earlier and fallen in case of a sale done earlier) you will make a
profit and you receive the payment from the exchange. In case the price movement is adverse,
you will make a loss and you will have to make the payment to the exchange. Margins are thus
collected to safeguard against any adverse price movement. Margins are quoted as a percentage
of the value of the transaction.
Important facts for NRI customers:
Buying and selling on margin in India is quite different than what is referred to in US markets.
There is no borrowing of money or shares by your broker to make sure that the settlement takes
place as per SE schedule. In Indian context, buying/selling on margin refers to building a
leveraged position at the beginning of the settlement cycle and squaring off the trade before the
settlement comes to end. As the trade is squared off before the settlement cycle is over, there is
no need to borrow money or shares.
Buying On Margin : Suppose you have Rs 1,00,000 with you in your Bank account. You can use
this amount to buy 10 shares of Infosys Ltd. at Rs 10,000. In the normal course, you will pay for
the shares on the settlement day to the exchange and receive 10 shares from the exchange
which will get credited to your demat account. Alternatively you could use this money as margin
and suppose the applicable margin rate is 25%. You can now buy upto 40 shares of Infosys Ltd.
at Rs 10,000 value Rs 4,00,000, the margin for which at 25% i.e. Rs 1,00,000. Now as you do not
have the money to take delivery of 40 shares of Infosys Ltd. you have to cover (square) your
purchase transaction by placing a sell order by end of the settlement cycle. Now suppose the
price of Infosys Ltd rises to Rs. 11000 before end of the settlement cycle. In this case your profit
is Rs 40,000 which is much higher than on the 10 shares if you had bought with the intent to take
delivery. The risk is that if the price falls during the settlement cycle, you will still be forced to
cover (square) the transaction and the loss would be adjusted against your margin amount.
Selling On Margin : You do not have shares in your demat account and you want to sell as you
expect the prices of share to go down. You can sell the shares and give the margin to your broker
at the applicable rate. As you do not have the shares to deliver you will have to cover (square)
your sell transaction by placing a buy order before the end of the settlement cycle. Just like
buying on margin, in case the price moves in your favor (falls) you will make profit. In case price
goes up, you will make loss and it will be adjusted against the margin amount.
Top
Types Of Orders:
There are various types of orders, which can be placed on the exchanges:
Limit Order : The order refers to a buy or sell order with a limit price. Suppose, you check the
quote of Reliance Industries Ltd.(RIL) as Rs. 251 (Ask). You place a buy order for RIL with a limit
price of Rs 250. This puts a cap on your purchase price. In this case as the current price is
greater than your limit price, order will remain pending and will be executed as soon as the price
falls to Rs. 250 or below. In case the actual price of RIL on the exchange was Rs 248, your order
will be executed at the best price offered on the exchange, say Rs 249. Thus you may get an
execution below your limit price but in no case will exceed the limit buy price. Similarly for a limit
sell order in no case the execution price will be below the limit sell price. Market Order : Generally
a market order is used by investors, who expect the price of share to move sharply and are yet
keen on buying and selling the share regardless of price. Suppose, the last quote of RIL is Rs
251 and you place a market buy order. The execution will be at the best offer price on the
exchange, which could be above Rs 251 or below Rs 251. The risk is that the execution price
could be substantially different from the last quote you saw. Please refer to Important Fact for
Online Investors. Stop Loss Order : A stop loss order allows the trading member to place an order
which gets activated only when the last traded price (LTP) of the Share is reached or crosses a
threshold price called as the trigger price. The trigger price will be as on the price mark that you
want it to be. For example, you have a sold position in Reliance Ltd booked at Rs. 345. Later in
case the market goes against you i.e. go up, you would not like to buy the scrip for more than
Rs.353. Then you would put a SL Buy order with a Limit Price of Rs.353. You may choose to give
a trigger price of Rs.351.50 in which case the order will get triggered into the market when the
last traded price hits Rs.351.50 or above. The execution will then be immediate and will be at the
best price between 351.50 and 353. However stock movements can be so violent at times. The
prices can fluctuate from the current level to over and above the SL limit price, you had quoted, at
one shot i.e. the LTP can move from 350…351…and directly to 353.50. At this moment your
order will immediately be routed to the Exchange because the LTP has crossed the trigger price
specified by you. However, the trade will not be executed because of the LTP being over and
above the SL limit price that you had specified. In such a case you will not be able to square your
position. Again as the market falls, say if the script falls to 353 or below, your order will be booked
on the SL limit price that you have specified i.e. Rs. 353. Even if the script falls from 353.50 to
352 your buy order will be booked at Rs. 353 only. Some seller, somewhere will book a profit in
this case form your buy order execution. Hence, an investor will have to understand that one of
the foremost parameters in specifying on a stop loss and a trigger price will have to be its
chances of executionability as and when the situation arises. A two rupee band width between
the trigger and stop loss might be sufficient for execution for say a script like Reliance, however
the same band hold near to impossible chances for a script like Infosys or Wipro. This vital
parameter of volatility bands of scrips will always have to be kept in mind while using the Stop
loss concept.
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Circuit Filters And Trading Bands:
In order to check the volatility of shares, SEBI has come with a set of rules to determine the fixed
price bands for different securities within which they can move in a day. As per Sebi directive, all
securities traded at or above Rs.10/- and below Rs.20/- have a daily price band of ±25%. All
securities traded below Rs. 10/- have a daily price band of ± 50%. Price band for all securities
traded at or above Rs. 20/- has a daily price band of ± 8%. However, the now the price bands
have been relaxed to ± 8% ± 8% for select 100 scrips after a cooling period of half an hour. The
previous day's closing price is taken as the base price for calculating the price. As the closing
price on BSE and NSE can be significantly different, this means that the circuit limit for a share on
BSE and NSE can be different.
Top
Badla financing
In common parlance the carry-forward system is known as 'Badla', which means something in
return. Badla is the charge, which the investor pays for carrying forward his position. It is a hedge
tool where an investor can take a position in a scrip without actually taking delivery of the stock.
He can carry-forward his position on the payment of small margin. In the case of short-selling the
charge is termed as 'undha badla'. The CF system serves three needs of the stock market :
Quasi-hedging: If an investor feels that the price of a particular share is expected to go up/down,
without giving/taking delivery of the stock he can participate in the volatility of the share. ? Stock
lending: If he wishes to short sell without owning the underlying security, the stock lender steps
into the CF system and lends his stock for a charge. ? Financing mechanism: If he wishes to buy
the share without paying the full consideration, the financier steps into the CF system and
provides the finance to fund the purchase The scheme is known as "Vyaj Badla" or "Badla"
financing. For example, X has bought a stock and does not have the funds to take delivery, he
can arrange a financier through the stock exchange 'badla' mechanism. The financier would
make the payment at the prevailing market rate and would take delivery of the shares on X's
behalf. You will only have to pay interest on the funds you have borrowed. Vis-à-vis, if you have a
sale position and do not have the shares to deliver you can still arrange through the stock
exchange for a lender of securities. An investor can either take the services of a badla financier or
can assume the role of a badla financier and lend either his money or securities. On every
Saturday a CF system session is held at the BSE. The scrips in which there are outstanding
positions are listed along with the quantities outstanding. Depending on the demand and supply
of money the CF rates are determined. If the market is over bought, there is more demand for
funds and the CF rates tend to be high. However, when the market is oversold the CF rates are
low or even reverse i.e. there is a demand for stocks and the person who is ready to lend stocks
gets a return for the same. The scrips that have been put in the Carry Forward list are all 'A'
group scrips, which have a good dividend paying record, high liquidity, and are actively traded.
The scrips are not specified in advance because it is then difficult to get maximum return. All
transactions are guaranteed by the Trade Guarantee Fund of BSE, hence, there is virtually no
risk to the badla financier except for broker defaults. Even in the worst scenario, where the broker
through whom you have invested money in badla financing defaults, the title of the shares would
remain with you and the shares would be lying with the "Clearing house". However, the risk of
volatility of the scrip will have to be borne by the investor.
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Securities lending
Securties lending program is from the NSE. It is similar to the Badla from the BSE, only difference
being the carry forward system not being allowed by the NSE. Meaning this is a where in a holder
of securities or their agent lends eligible securities to borrowers in return for a fee to cover short
positions.
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Insider trading:
Insider trading is illegal in India. When information, which is sensitive in the form of influencing the
price of a scrip, is procured or/and used from sources other than the normal course of information
output for unscrupulous inducement of volatility or personal profits, it is called as Insider trading.
Insider trading refers to transactions in securities of some company executed by a company
insider. Although an insider might theoretically be anyone who knows material financial
information about the company before it becomes public, in practice, the list of company insiders
(on whom newspapers print information) is normally restricted to a moderate-sized list of
company officers and other senior executives. Most companies warn employees about insider
trading. SEBI has strict rules in place that dictates when company insiders may execute
transactions in their company's securities. All transactions that do not conform to these rules are,
in general, prosecutable offenses under the relevant law.
Top
Sunday July 29 8:12 pm
MY TRADE MARKET KNOWLEDGE

SHAREKHAN SERVICES NOW! RESEARCH NEWS CORNER DERIVATIVES CENTRE
Welcome to the Sharekhan.com Knowledge Centre Section!
Home -> Knowledge Centre Trade Now
Knowledge Advanced Investing - Tips and Tricks
Center
Knowledge Center Chapter 2:
Chapter 1: Chapter 3:
Home Understanding Markets
The Nature of the Market Investment Strategies
School Better
Learning To Invest4:
Chapter Chapter 5: Chapter 6:
Getting Started
More on Valuing equities Investing Styles Trader's Handbook
Advanced
Investing Chapter 7: Chapter 8: Chapter 9:
Futures and Options
More on Investing Portfolio Strategies Essentials of stock picking
SharekhanChapter
FAQ 10:
ShareKhanPsychology of Investing
Glossary
Stock Trivia
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Book Reviews Futures and Options
Guest Columns Countering Counterparty risk
Page Tools
Some time back, we learnt that the futures are traded on a futures exchange,
Save This Page which works as a guarantor to all trades in futures and therefore take care of all
counter party risk. But isn't it a big risk for exchanges? How does the exchange
Email This Page take care of this counter party risk?
Print This page

Default risk can crash the entire system
Futures normally have a maturity period varying
from one month to one year. If the futures
exchanges settle these trades on the last day of
maturity, then again the default risk becomes high.
And suppose Mr XYZ has 40 futures contracts
long and there are 40 investors with short positions in one contract each. Then if
Mr XYZ defaults, 40 contracts will default and this may crash the systems
completely.
Let's answer this question: which is more risky, a full

payment of Rs90,000 after 90 days and or a payment of
Rs1,000 every day for next 90 days? Of course, the full
payment after 90 days. The futures exchanges
understand this and therefore instead of a settlement on
the final day of maturity, they have opted for daily
settlement of all the open positions in the futures. Smart fellows!
But if even in this arrangement of daily settlement, Mr XYZ does not pay his
one day loss, what happens to the other investors? How does the futures
exchange take care of this one day default risk?
An initial margin takes care of compulsive defaulters

Future exchanges circumvent the really persistent defaulters using some very
prudent measures, thus neutralising counter party risk. They require that both the
parties involved in the future transaction pay an initial margin to the exchange.
The margin is fixed based on the maximum historical price movement on the
while the NSE requires a 7% initial margin on Nifty futures. This initial margin
is expected to cover at least one day's price movement in the Sensex or Nifty.
(We will learn about the Sensex and Nifty futures in the following series).
Futures are settled on a daily basis, depending on the market

value of the future's closing price. But how does the daily
settlement take place? Is it a very cumbersome process? In a
word, no.
Classic Account SpeedTrade Dial-n-Trade Portfolio Management Commodities
Get in touch with us! Chat | Call Us at: Futures are cash settled
1-800-22-7500 | Lost? Click here for our Sitemap | Best viewed in Internet
The most beautiful thing about futures is that they are cash settled. There is no
Explorer 6.0 or above
delivery
Privacy | Security | Disclaimer of asset required
| Copyright | Termsof&aConditions
party who |shorts
Rulesthe future and vice
& Regulations versa.| So
| Careers if
Advertise with Us
your position in a future makes a profit, then you receive cash.
Sharekhan Ltd.: BSE Cash-INB011073351; F&O-INF011073351; NSE – INB/INF231073330; MAPIN – 100008375;
DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP00000066; Mutual Fund: ARN 20669.
Sharekhan CommoditiesThe Pvt.daily
Ltd.:settlement
MCX-10080; alsoNCDEX-00132;
takes place through cash.–So
MAPIN if you are holding
100013912, For any acomplaints
long email at
position in future and today it ended above
igc@sharekhan.com yesterday's level, then you receive
Regd/Admin Add:- A-206, the Phoenix
difference between
House, yesterday's
Phoenix price and today's
Mills Compound, closing
Senapati Bapatprice. This
Marg, transfer
Lower Parel, Mumbai -
of funds is also known as daily400013.
margin, which is based on mark-to-market basis.
Please carefully read the risk disclosure document as prescribed by SEBI & FMC and Do’s & Don’ts by NCDEX
So does one have to take care of daily cash transactions?
Margin account makes it easy

In reality, when you enter into a futures contract, you deposit a certain amount in
your margin account with your broker. Normally, this opening balance is above
the requisite initial margin set by the exchanges. This extra amount is to take
care of losses on your position in futures, if any. But what happens if the amount
in the margin account becomes zero?
The margin account can never reach zero level because your broker will not
allow you to carry the position in the futures if the account balance falls below
10%. If your position in the futures keeps making losses and the account balance
falls to 10%, then your broker will ask you to refill the margin account to 15%
of the current exposure in the futures. So the losses in the futures have to be paid
as soon your account falls by 5%. But what about the profit on your position in
the futures? Are they being paid to you according to your margin account
balance?
Yes, the profit on the futures positions are also settled based on the balance in
the margin account. So if your margin account balance goes above 15% of the
current exposure, then you can withdraw this extra money from your margin
account. But in practice, this is done once a week on a weekend. If your margin
account balance is in excess of 15% of the current exposure on futures on
Friday, then you can withdraw that amount on that day.
Let's take a simple example of a future contract, which you bought at Rs1,000
on 3rd January 2000. The future behaved in the following manner for the next
10 days.
Futures Loss/ Margin % Of Margin Closing Margin %0f
Date
level gain a/c exposure Call a/c exposure
1000 150.0 150.0 15.0%
03-Jan-00 980 -20 130.0 13.30% 130.0 13.3%
04-Jan-00 970 -10 120.0 12.40% 120.0 12.4%
05-Jan-00 960 -10 110.0 11.50% 110.0 11.5%
06-Jan-00 950 -10 100.0 10.50% 100.0 10.5%
07-Jan-00 930 -20 80.0 8.60% 59.5 139.5 15.0%
10-Jan-00 945 15 154.5 16.30% 154.5 16.3%
11-Jan-00 960 15 169.5 17.70% 169.5 17.7%

The Indian Investor-Futures

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The Indian Investor's Blog

Where and how to manage investments in India.

Name: Deepak Shenoy

View my complete profile

Online Trading Sites

Thursday, December 28, 2006

LinkFest #5 - Myths, advice, caution and all...

5 common investment myths (Personalfn)

Unshining India, (Dhirendra Kumar, Value Research Online)

MF vs. Sensex, Sensex wins? (Economic Times)

Labels: Advice, LinkFest, MutualFunds

Mutual Fund Identification Number (MIN) now mandatory

Does this apply to me?

How do I get this MIN thing?

How much does it cost?

Do I have to do this again and again for every single fund?

Do Existing investors need to do something? Nothing if you don't plan to

Why do I have to do this?

What about Non Resident Indians (NRIs)?

Okay, I'm still confused. What to do?

Labels: Commentary, Compliance, MIN, MutualFunds

Deepak Shenoy 9:54 AM | 4 comments |

Futures and Options: An introduction

No delivery right now

Calls and puts

CALL is the right to purchase

Why do I write options? Because most options go unexercised! Meaning, I can

In the money, out of the money

Labels: Futures, Options

Deepak Shenoy 6:14 PM | 6 comments |

SEBI has posted a circular (MRD/DoP/Dep/SE/Cir-13/06, Sep 26 2006) that

Labels: Commentary, Compliance

Deepak Shenoy 2:32 PM | 3 comments |

Fundas: Long Term Capital Gains

So the tax department allows you to "index" your purchase according to

Rs. 10,000 x (182 divided by 100)

Indexed purchase value = Rs. 10,000 x (519 / 447) = Rs. 11,610

Indexed profit: 20% LTCG Tax

Also read: http://theinvestorblog.blogspot.com/2005/11/capital-gains-tax-

Labels: CapitalGains, IncomeTax

Deepak Shenoy 9:52 AM | 1 comments |

Labels: MutualFunds, SIP

Deepak Shenoy 12:30 PM | 7 comments |

LinkFest #4: Open Letter, Real Estate bubble, Money Today

Open letter to analysts from a harried investor (Author unknown)

A new Insurance and Mutual Fund company: Bharti-AXA

SEBI suspends Reliance Broking arm for four months (Sify)

Money Today: A new magazine

Is there a bubble in real estate? (IndiaEconomy.org)

Deepak Shenoy 4:21 PM | 1 comments |

Is a Rs. 10 mutual fund better than a Rs. 100 fund?

If you bought it at Rs. 20, NAV will be Rs. 150.

What's the NAV?

Lesser number of units is like small change

Growth is important, not unit price

Labels: Commentary, MutualFunds

Deepak Shenoy 10:32 AM | 4 comments |

Markets have crashed, where do we go from here?

India Inc. slowing down?

For a mutual fund investor: Usually crashes are accompanied by huge

Labels: Advice, Commentary, Crash

Deepak Shenoy 10:21 PM | 2 comments |

Tax saving schemes: Wait till March 2007