Nifty adopts Free Float market cap calculation methodology

Nifty has moved on to free float method for calculating the weights of the companies in the index. I just checked on investopedia for the definition of free-float methodology and this is what it says

Free-float methodology market capitalization is calculated by taking the equity's price and multiplying it by the number of shares readily available in the market. Instead of using all of the shares outstanding like the full-market capitalization method, the free-float method excludes locked-in shares such as those held by promoters and governments.

Calculated as:

And it also goes on to say that "The free-float method is seen as a better way of calculating market capitalization because it provides a more accurate reflection of market movements."

And what was the impact of this?

"stocks that will lose their weightage in the index have seen sharp falls in share prices in the past few days," says a report from business line. It also points out that the selling is from the index funds who have to realign their portfolios based on the new weights assigned. Some of the companies that have lost weightage are NTPC, ONGC, Power Grid, SAIL and Bharti Airtel.

In general I think this is a move in the right direction for NSE and Nifty.

rk

Warren Buffet's funny and sensible quote

Warren Buffet is supposed to have quoted the following during an interview on US economic recovery

"You can't produce a baby in one month by getting nine women pregnant."

it does make sense, doesn't it?

Top 10 challenges for India to overcome!!

Goldman Sachs Economic Research has come out with a list of challenges that India needs to overcome if she has to achieve her true potential. The paper titled Global Economics Paper contains the following list

1. Improve governance
2. Raise basic educational achievement
3. Increase quality and quantity of universities
4. Control inflation: Try Inflation Targeting?
5. Introduce a credible fiscal policy: a medium-term strategy
6. Liberalize financial markets
7. Increase trade with neighbors
8. Increase agricultural productivity
9. Improve infrastructure
10. Improve environmental quality

Well, there are no surprises in this list. They are more or less obvious and they are definitely the areas to invest in.

RK

Indian Mutual Fund Investors can rejoice!!

There is GOOD news for the Indian Mutual Fund investors. Sebi decided yesterday that there will be no ENTRY LOAD for any of the mutual fund schemes AND the distributor commission is to be paid by customers themselves and it wont be deducted by the fund anymore. What needs to be done now is to make sure that this message reaches the general public. Here is the snippet taken out of the news report on CNBC

The board considered the question of the existing manner of payment to the mutual fund advisors by investors and decided that there will be no entry load for any schemes. The investor will decide the commission that he is to pay to the distributor directly. It will not be deducted by the fund and then paid to the distributor. If the investor is making an application for Rs 100 that means the entire Rs 100 will get invested. There will be no deduction from that because there is no entry load. The board also decided that if the distributor is selling different schemes then he must disclose to the investor as to what commission he is getting for different schemes. This will avoid the conflict of interest and will allow investors to understand why a particular scheme is being recommended to them.

Warren Buffet's low diversification strategy good for small and average investors?

Warren Buffet is a great man and I am a big of him and his investment principles. He puts in lots of wisdom in those few words. However there is one principle of his that I do not fully agree with, or, at the least think is not good for small investors and for starters to follow. That's his "low diversification" strategy!

He espouses the virtue of concentration, rather than diversification, for beating the markets. This is valid but to do that the guy needs to be knowing exactly what he is doing and he needs to have lots of common sense and lots of financial acumen. But how many guys have it? 20%? maybe if you apply the 80:20 principle. That's why I think, and I experienced it first hand as well, diversification is the most important aspect that a guy, who has just started on his investing journey, and small investors, who put in their hard earned money, should follow.

For this category of investors I believe avoiding big losses and disappointments is the key and the only way to do this is through diversification - spreading your money across 30-40 stocks for e.g.. Of course one cannot achieve market beating results with this kind of diversification but one can at least limit downside on their investments. This can be the base that one can build on as they spend few years on the market and pick up the nuances of stock picking. Of course this means that one should spend the time and effort in trying to learn and gain knowledge. If the time and interest is not there then it is better to outsource your money management to a mutual fund manager.

I started investing at the end of 2007, right at the peak of the Indian markets. And I did the mistake of putting in too much money on too few stocks and too quickly. I did them by following analyst's recommendations and by following the technical charts. The result of it is that when the markets crashed my investments were down more than twice the index drop.

I have been trying to learn more about the markets and about stock picking since then. And I am also open to following different strategies to see which works for me and which I am comfortable with. Diversification and periodic investments(weekly) of smaller amounts is something that I am following now and it seems to be working for me - either because it really works or because the markets have been doing well of late. But it certainly does give me time to analyze each of these companies, that I like, in more detail without missing the upside and also limiting the downside.

RK

Warren Buffet mistakes in 2008

List of 50 stocks excluded from NSE futures and options contracts

The following list of stocks have been excluded from NSE futures and options contracts for an year. As per the report

the existing unexpired contracts for the month of and April, May and June 2009 would continue to be available for trading till their respective expiry and new strikes would also be introduced in these existing contract months.

This circular shall be effective from May 4, 2009

3i Infotech Limited

Alok Industries Limited

Amtek Auto Ltd

Aptech Limited

Arvind Limited

Balaji Telefilms Ltd.

Ballarpur Industries Limited

Bata India Ltd

Birla Corporation Ltd

Bombay Dyeing & Mfg Co. Ltd

Central Bank of India

Development Credit Bank Limited

Edelweiss Capital Limited

Escorts Ltd

Everonn Systems India Limited

Gateway Distriparks Limited

Gitanjali Gems Limited

Gujarat Narmada Valley Fertilizer Co. Ltd.

Gujarat Alkalies and Chemicals Ltd.

Havells India Limited

HCL Infosystems Ltd

Hindustan Oil Exploration Co. Ltd

IRB Infrastructure Developers Limited

Jet Airways (India) Ltd.

JSL Limited

Kesoram Industries Ltd.

KSK Energy Ventures Limited

The Karnataka Bank Limited

Lakshmi Machine Works Ltd.

Mahindra Lifespace Developers Limited

Maharashtra Seamless Ltd

MindTree Limited

Monnet Ispat Ltd

MRF Ltd.

Nava Bharat Ventures Limited

New Delhi Television Limited

Network 18 Fincap Limited

NIIT Limited

Peninsula Land Limited

Rajesh Exports Ltd.

Reliance Industrial Infrastructure Limited

S. Kumars Nationwide Ltd

SREI Infrastructure Finance Limited

SRF Ltd.

Strides Arcolab Limited

Thermax Ltd

Torrent Power Limited

TVS Motor Company Limited

UTV Software Communications Limited

Wockhardt Limited

Indian Companies 2008 - 2009 Annual Results on 17th Apr 2009

The following companies have reported their annual and 4th quarter results on 17th April 2009.

SBI Home Finance:- For the full year ended March 2009, net loss reported to Rs 24.63 crore as against net loss of Rs 18.25 crore during the previous year ended March 2008.

GRUH Finance:- For the full year ended March 2009, net profit rose 18.75% to Rs 50.28 crore as against Rs 42.34 crore during the previous year ended March 2008.

Sukhjit Starch & Chemicals:- For the unaudited full year, net profit declined 40.45% to Rs 12.00 crore in the year ended March 2009 as against Rs 20.15 crore during the previous year ended March 2008.

Logix Microsystems:- For the unaudited full year, net profit rose 82.35% to Rs 8.37 crore in the year ended March 2009 as against Rs 4.59 crore during the previous year ended March 2008.

Mysore Paper Mills:- For the unaudited full year, net profit rose 337.35% to Rs 22.13 crore in the year ended March 2009 as against Rs 5.06 crore during the previous year ended March 2008.

Sonata Software:- For the full year, net profit rose 45.43% to Rs 53.36 crore in the year ended March 2009 as against Rs 36.69 crore during the previous year ended March 2008.

Power Finance Corporation:- For the unaudited full year, net profit rose 12.30% to Rs 1355.19 crore in the year ended March 2009 as against Rs 1206.76 crore during the previous year ended March 2008.

ETC Networks:- For the unaudited full year, net profit declined 59.93% to Rs 9.36 crore in the year ended March 2009 as against Rs 23.36 crore during the previous year ended March 2008.

Compuage Infocom:- For the full year, net profit rose 3.74% to Rs 4.44 crore in the year ended March 2009 as against Rs 4.28 crore during the previous year ended March 2008.

Saving money, cutting expenses during recession

I liked to buy the latest editions of popular magazines as soon as they go on sale. Now I save up some money by waiting a month or two and picking up a copy at the nearby library.

Also read "A funny way to cut costs"

RK

Smart ways to save money during recession

1. If you have more than one girl friend then layoff the most expensive ones
2. If you have a single girl friend then cut down on expensive dinners and gifts
3. If girl friend is not reasonable then meet her less often or better take a break and enjoy your single hood
4. If you have a mistress then its needless to say that you won't be able to maintain her any longer. So people!!! recession is not a bad thing after all. It actually helps your spouse to remain faithful to you.
5. If you have a wife then god save you!

funny?

RK

Think before investing in India's Exchange Traded Index Funds

Index Funds are good. How about Exchange Traded Index Funds? They are good. That's what we are told and that's what I thought until I checked the volumes of the ETFs listed on NSE. To my horror and surprise I found that the volumes are miserably low and for some funds there were no trades at all. I use the stats from 6th Mar 2009 to drive home my point

Benchmark Mutual Fund-Nifty Junior Benchmark ETF -6257
Benchmark Mutual Fund-Nifty Benchmark ETF -76129
Benchmark Asset Management Company Pvt. Ltd. - Bank Index -1900
Reliance Mutual Fund -Banking Exchange Traded Fund (ETF) -236
Quantum Index Fund -Exchange Traded Fund (ETF) -104
Benchmark Mutual Fund - PSU Bank Benchmark Exchange -510
Traded Scheme
Kotak Mahindra Mutual Fund -0

From the stats you can clearly see that the volumes are pathetically low so its quite possible that you won't be able to sell when you want and at the prices you want since the spread between the bid and ask prices are high. Out of these funds only Nifty Benchmark Index seems to have decent volumes so that may be the only fund worth looking at.

I think the concept itself is very good but unless more people are aware of these funds and participate in them you are in real danger of getting stuck. You may not find buyers and you may get quotes far less than the market price. So think hard before investing in the ETFs.

RK

Indian Markets :- Indian Companies that are better choices for investments during this financial crisis

I came across a study on BusinessStandard that listed Indian Companies that are sitting on huge cash reserves with good business growth potential. As is often said companies with cash are expected to do better during turbulent times, like this year, where the financial crisis jolted the world economies. I believe in this saying and I do like some companies among the list from this study and I am certainly looking at putting in some money into these stocks during these times. I am sharing this list on this blog hoping it will be of use to readers.

CASH KINGS
Rs crore	Cash + CE	Ent Value	Cash + CE/ Ent Value (%)	Mkt Cap	Price (Rs)	P/E (x)	P/BV (x)	Dividend Yield (%)
Reliance Power	13,440	23,074	58.2	22,626	94.40	209.8	1.7	-
Sterlite Inds	14,074	21,467	65.6	16,392	231.30	11.6	1.2	1.7
Hind.Zinc	7,695	11,732	65.6	11,732	277.65	3.0	1.0	1.8
Aditya Birla Nuvo	6,718	11,386	59.0	4,739	498.80	18.1	1.3	1.2
MTNL	3,758	3,926	95.7	3,915	62.15	7.4	0.3	6.4
Bajaj Holdings	3,213	3,413	94.2	3,413	337.30	5.9	1.1	5.9
Indiabulls Fin	7,412	13,823	53.6	2,601	102.55	6.9	0.9	8.3
Financial Tech	1,402	2,741	51.2	2,316	504.65	2.2	1.6	4.0
Jai Corp	1,825	2,394	76.2	2,312	129.55	30.0	0.9	0.8
Max India	3,842	6,076	63.2	2,253	101.50	33.8	1.1	-
Edelweiss Cap	1,910	3,653	52.3	2,083	278.00	81.0	1.5	0.7
Engineers India	1,417	1,959	72.3	1,959	348.90	8.0	1.7	3.2
GTL	1,277	2,452	52.1	1,750	185.05	14.6	1.9	1.6
PTC India	1,452	1,094	132.7	1,094	48.10	14.2	0.7	2.1
TV 18 India	883	1,562	56.6	1,015	84.65	24.8	2.1	2.4
Market Price, Price/Book Value (P/BV), Price-to-earnings ratio (PE), Market Capitalisation and Dividend Yield as on October 28, 2008 CE= Cash equivalents (investments minus those in group/associate companies); Mcap=Market capitalisation; Ent Value=Enterprise value (market cap + debt) Source: Capitaline Plus

RK

My stock picks for the month of september and october

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I had listed the stocks that I am looking during this month at http://theindiastockmarket.blogspot.com/2008/09/stocks-to-invest-during-month-of.html

There I had listed Tata Steel, Hotels and Reliance Communications as the ones which I am trying to get into. I got in Reliance Communications and Tata Steel in the first week but as you know Lehmann brothers and AIG screwed the entire financial industry and the Indian stock market went for a spin. They are atleast 10% down from where I bought them. I got into Indian Hotels as well and its stuck at the price where I bought which was after the crisis. They still remain my choices esp Indian Hotels and Tata Steel, I am looking to add some more of them.

In the mean time I took this meltdown to get into Reliance Industries and also used the bounced back after 700 bn Fed package to get out Infosys which proved to be a wise choice. I still have a major portion of my portfolio in technology and I know for sure that I am stuck with them for another couple of years.

I am also looking at Tata Chemicals, I already have it in my portfolio but only a meager number of shares. I added in few and will add some more. ICICI and DLF are at mouth watering price but already made a significant investment there so got to wait for few more weeks to add on more.

And I am going to use any upswing to get out of technology. I will keep cash and wait. Thats what I am going to do for the moment. Hope its not a long wait!!

RK

To trade or invest during 2008?

Throughout these months I am torn between two ends - Should I sell off and book profits when the market moves up and re-enter again at lower levels or Should I just hold and follow the buy-and-hold strategy. I am sure many of you would have faced this dilemma. I still could not decide which one to follow. I basically want to follow the buy-and-hold principle but the markets are too volatile during this year where it really makes sense to sell at higher levels and re-enter later when the markets crash. Of course it is not known if the markets will crash again but there are too many factors that point to the inability of the markets to hold higher levels for a sustained period of time.

So trading can give you at least some returns during these volatile times but it is against the principle of investing. I have seen many stocks which were 10-15% in the positive and now they are way down at -20%. Is this loss of opportunity to make a decent return? Or does it make sense to just stick to your principles?

I am not able to decide on one. For the moment I am prepared to sell off stocks that are sensitive to interest rates and oil prices at higher levels and hold on to ones, esp technology, that I perceive as relatively stable. One drawback is of course if the Oil continues to fall then I can miss out on higher returns as these rate sensitives can move up pretty fast. This is a learning phase for me so I am just prepared to make mistakes and learn.

RK

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Mistakes to avoid while investing in equities or stocks

Read an article that was impressive in its list of mistakes to avoid while investing in equities or stocks. I agree with all of the points but I also think one should take advantage of any short term volatility in the stock markets or the individual company stock price.

Here is the list of mistakes suggested to be avoided

Overconfidence - Don't be unrealistically optimistic

Over enthusiasm to trade - Not every ball should be hit (analogy to cricket)

Missing the benefits of compounding of capital - Learn from Einstein

Worrying about the market - But there is no answer to your favourite question - Suggests to worry about the companies you invest in rather than the market

Timing the market - Around 99% of investors will fail in this strategy

Selling in times of panic - You should be doing the opposite

Focusing on past performance - Its like driving forward while looking backwards

Diversifying too much will kill you - Investing is all about staying alive

Full article @ http://economictimes.indiatimes.com/Markets/News__Views/Analysis/Eight_mistakes_to_avoid_while_investing/articleshow/msid-2900010,curpg-1.cms

RK
Singapore Property Classifieds and Social Network

Ratios that one can use to pick good stocks

Here is a list of 8 ratios that can help one in picking up good stocks.
source: Rediff

1. Ploughback and reserves
2. Book value per share
3. Earnings per share (EPS)
4. Price earnings ratio (P/E)
5. Dividend and yield
6. Return on Capital Employed (ROCE)
7. Return on Net Worth (RONW)
8. PEG ratio

Click here to read the complete article

RK
Singapore Rentals and Real Estate Social Network