WHY NOT FDs ?

WHY NOT FDS ? THIS IS THE EXACT QUESTION MY FRIEND ASKED ME WHEN I SUGGESTED HIM TO INVEST IN SHARES.
NOT JUST MY FRIEND , BUT ALMOST EVERYONE THINKS THAT HAVING FDs (FIXED DEPOSITS) IN BANKS IS THE BEST INVESTMENT FOR THEM. WHEN I SUGGESTED HIM TO INVEST IN SHARES HE WAS QUICK TO POINT OUT HOW RISKY THEY ARE AND HOW SAFE FDs ARE.

I HAVE ALREADY EXPLAINED HOW PROFITABLE SHARES CAN BE WITHOUT ANY MAJOR RISKS , AND SO THE POINT TO PROVE TODAY IS "HOW SHARES ARE BETTER THAN FDs"
AN EXAMPLE TO MAKE THINGS EASIER AS USUAL
1.CONSIDER THAT YOU ARE BLOWING A BALLOON NAMED 'SAVINGS' .

2.YOU ARE FILLING IT UP WITH AIR i:e YOUR HARD OWNED MONEY OR WE CALL IT 'INVESTMENT' .

3.NOW THE MORE YOU INVEST THE FATTER YOUR SAVINGS ARE GOING TO BE.

4.BUT THERES A MAJOR HITCH. EVEN IF YOU KEEP A BLOWN BALLOON SEALED TIGHT ( A PERFECT ANALOGY TO FDs) IT LOOSES AIR PERIODICALLY THROUGH SMALL PORES.
IN OUR CONTEXT THE PORES WHICH CAUSE THE LOSS ARE CALLED 'INFLATION'
SO IN OUR CASE EVEN IF YOU KEEP ON INVESTING IN FDs , INFLATION IS NOT GOING TO LET YOU GO FURTHER.

TAKE THE PRESENT SCENARIO. BANKS ARE OFFERING UPTO 10% ( MAX) PER ANNUM ON FDs OF 1 TO 3 YEARS, WHILE THE INFLATION IS HOVERING AROUND 5% MARK.
LETS SAY YOU INVEST Rs 100/- FOR A YEAR . AT THE YEAR END YOU WILL GET BACK Rs 110/-. BUT THE INFLATION IS ITSELF 5%, SO THE TRUE VALUE COMES OUT BE ONLY Rs 105/-,THUS YOUR NET PROFIT IS JUST 5% .
THUS TODAYS Rs 100/- ARE GOING TO BE WORTH ONLY Rs 95/- IN THE NEXT YEAR,OR IN OTHER WORDS FOR SOMETHING WORTH Rs 100/- THIS YEAR ,NEXT YEAR YOU WILL NEED TO SHELL OUT Rs 105/-.

AS AGAINST ALL THIS, SHARES OFFER YOU 15 -18% INTEREST PER ANNUM,AND THERES NO NEED TO EXPLAIN THAT YOU WILL END UP EARNING MORE.TO ADD TO IT YOU HAVE GREAT LIQUIDITY,WHICH HELPS YOU WITHDRAW OR REINVEST AS AND WHEN YOU NEED.

SOME IMPORTANT TERMS

THE LAST POST OF MINE MENTIONED FPO AND I LEFT IT WITHOUT EXPLANATION.THE ONLY REASON BEHIND IT WAS THAT I WISHED TO SEGREGATE ALL THESE ABBREVIATIONS SO THAT YOU DON'T MISS ANY.

SO HERE WE GO

1.FPO:
FPO STANDS FOR FOLLOW-ON PUBLIC OFFER.ITS THE NEXT STEP FROM IPO . WHEN A COMPANY WHOSE STOCKS ARE ALREADY LISTED ,MAKES A SECOND OFFER TO THE PUBLIC TO BUY THEIR SHARES DIRECTLY,THEN IT IS TERMED AS FOLLOW-ON PUBLIC OFFER.

SAY FOR EXAMPLE , BEML AND ICICI BOTH ARE LISTED ON THE SENSEX/NIFTY SO THE LATEST PUBLIC OFFERING OF THEIR SHARES IS THE SECOND IN LINE OF THEIR IPO, AND HENCE IS TERMED AS FPO. COMPANIES MAKE USE OF FPO TO RAISE HUGE FUNDS AT ONE GO ,BY OFFERING A PRICE LOWER THAN THE ONE AVAILABLE AT THE EXCHANGE,THUS IT IS BENEFICIAL BOTH FOR THE COMPANY AND THE BUYER.

2.FII:
FII OR FOREIGN INSTITUTIONAL INVESTORS ARE FOREIGN FINANCE COMPANIES WHO INVEST IN THE SHARE MARKET.THEY RULE THE ROOST BECAUSE OF THE HEAVY FUND INFLUX THEY BRING ALONG.

3.FDI:
FDI STANDS FOR FOREIGN DIRECT INVESTMENT.HERE THE FOREIGN INVESTORS ARE ACTIVE PARTNERS OF THE COMPANY WHOSE SHARES THEY HOLD.

4.JV:
ITS THE TERM IN FASHION NOW-A-DAYS.JV IS ABBREVIATION FOR JOINT VENTURE.
WHEN TWO COMPANIES (MAINLY RIVALS) ALLY TO MAKE A NEW COMBINED COMPANY,MOSTLY TO TAKE ON COMPETITION,THEN A JOINT VENTURE RESULTS.
Eg TATA-JOHNSON , TATA-FICOSA , BHARTI-WALMART , HUTCHISSON-ESSAR , etc.

5.PSUs:
THESE ARE PUBLIC SECTOR UNITS i:e COMPANIES OWNED BY THE GOVERNMENT.
Eg HPCL,BPCL,ONGC,SBI etc

THERE ARE MANY SUCH TERMS WHICH JUST KEEP ON CROPPING UP HERE AND THERE.MOSTLY ITS THE PRINT MEDIA WHICH MAKES THESE ABBREVIATION SO THAT ITS EASIER TO PRINT THEM.I WILL KEEP YOU UPDATED ON MANY SUCH ABBREVIATION PERIODICALLY.
YOU OBVIOUSLY CAN MAIL ME ANY QUERIES TO MY E-MAIL I.D
belose_sanket@yahoo.co.in

WATCH OUT

RECENTLY THERE HAVE BEEN SOME DULL DAYS IN THE MARKET,WITH BOTH SENSEX AND NIFTY COMING OUT FLAT.VOLATILITY , ESSENTIAL TO MAKE GOOD PROFITS (EVEN LOSSES) SEEMS TO BE ABSENT.IN SUCH CASES IT IS ALWAYS WISE TO WAIT FOR THE RIGHT OPPORTUNITY,AND INVEST IN LONG TERM STOCKS.

THE FOLLOWING ACTIVITIES IN THE PAST WEEK SHOULDN'T REALLY BE MISSED OUT:

1.IF YOU ALL HAVE BEEN READING THE NEWSPAPERS (ESPECIALLY BUSINESS SECTION) THEN YOU MIGHT HAVE HEARD OF THE FM's (FINANCE MINISTER) ANNOUNCEMENT OF INCREASING THE BUFFER STOCK OF SUGAR. NOW THAT SOUNDS TOO SWEET FOR THE SUGAR MANUFACTURERS AND FOR COMMON INVESTORS LIKE US ITS TIME TO HUNT FOR THEIR SHARES.

2.AS I SAID BEFORE , MONSOON ALWAYS CAUSES DESTRUCTION ALL OVER INDIA (ALREADY IT HAS AFFECTED ANDHRA PRADESH AND MAHARASHTRA) AND SO CEMENT SHARE PRICES ARE TO BE WATCHED KEENLY.HAVING SHARES OF CEMENTS AND SUGAR COMPANIES IN YOUR PROFILE WILL BE AN ADDED ADVANTAGE IN NEAR FUTURE..

3.BEML (BHARAT EARTH MOVING LIMITED) IS COMING UP WITH AN FPO* WHICH HAS SET THE BELLS RINGING.THE PRICE BAND BEING Rs 1020 TO 1100/- MAY APPEAR TOO HIGH BUT IF YOU SEE THE CURRENT PRICE OF THEIR SHARES (Rs 1185/- AS OF TODAY) YOU REALIZE THAT IT CERTAINLY IS A GOOD DEAL.

TO ADD TO IT THEY ARE EXPECTED TO GRAB AN ORDER FOR METRO RAIL CARRIAGES .THE METRO PROJECT BEING IMPLEMENTED IN MUMBAI , DELHI AND BANGALORE MAY RAKE UP HUGE ORDERS FOR METRO CARRIAGES .
JUST TO INFORM YOU,A SINGLE METRO RAIL CARRIAGE COSTS AROUND 1.6 TO 1.8 MILLION.

SO FRIENDS ITS ALL ABOUT KEEPING YOU EYES WIDE OPEN,BECAUSE OPPORTUNITIES ARE EVERYWHERE,JUST THE ESSENTIAL RISK NEEDS TO BE TAKEN.

*FPO ??????????? MORE SUCH TERMS AND THEIR EXPLANATION IN THE NEXT POST

INVESTMENT LOGIC - 2

KEEPING UP WITH MY SO CALLED INVESTMENT LOGIC CONCEPT,HERE ARE SOME MORE EASY EXAMPLES.

LAST TIME WE SAW HOW A FLOOD OR EVEN A MEGA EVENT PRESENTS YOU A GREAT INVESTMENT OPPORTUNITY.BUT LET ME MAKE IT CLEAR THAT OPPORTUNITIES AREN'T LIMITED TO CALAMITIES OR DEVELOPMENTS BUT THERE ARE OPPORTUNITIES GALORE WHICH WE JUST DON'T SEEM TO NOTICE. OUR EFFORT SHOULD BE TOWARDS SEIZING AS MANY OF THESE OPPORTUNITIES.

LETS TRY TO MAKE A DRAFT OF ALL SUCH SMALL OPPORTUNITIES:

1.WITH THE ARRIVAL OF DIWALI THERE IS A BUZZ IN THE COMMODITY MARKET.EVERYONE SEEMS TO BE ON A SHOPPING SPREE.RIGHT FROM NEW VEHICLES,HOUSES,CLOTHES,ELECTRONIC GOODS TO FOOD STUFFS EVERYTHING BOUGHT ,AND THAT TOO ON A LARGE SCALE .SO ITS OBVIOUS THAT COMPANIES MANUFACTURING THE ABOVE GOODS ARE GOING TO PERFORM WELL DURING THIS PERIOD.(THAT'S THE REASON WHY WE DON'T HAVE DISCOUNT OFFERS DURING THIS VERY PERIOD)

2.WITH ELECTIONS APPROACHING THE SHARE MARKET TOO EXPERIENCES WINDS OF CHANGE. A CHANGE IN GOVERNMENT IMPLIES A CHANGE IN POLICY.THE NEW POLICY MAY SUIT SOME SECTORS WHILE IT MAY ADVERSELY AFFECT OTHER SECTORS. THE PRICES OF COMPANY SHARES ARE BOUND TO VARY ACCORDINGLY.

3.ANNOUNCEMENT OF BUDGET IS THE MOST VOLATILE TIME FOR THE SHARE MARKET. INCREASED OR DECREASED TAXES HAVE A HUGE IMPACT ON SHARE PRICES.

4.EVEN MERGERS,ACQUISITIONS ,SPLITS OF VARIOUS COMPANIES PROVE TO BE A MAJOR FACTOR.

5.SOMETIMES EVEN A PUBLIC STATEMENT FROM THE FINANCE MINISTER TOO PROVES SUFFICIENT FOR HECTIC ACTIVITY IN THE MARKET.

YOU MIGHT REALIZE THAT THERE ARE MANY SUCH OPPORTUNITIES IF YOU HAVE THAT CHANNEL OF THINKING.SCRUTINIZE EVERY BIT OF IMPORTANT NEWS TO SEE HOW YOU CAN MAKE USE OF IT.

INVESTMENT LOGIC

"INVESTMENT LOGIC", LET THE TITLE NOT SCARE YOU,I CERTAINLY AM NOT GOING TO GIVE A MANAGEMENT LECTURE TODAY.INVESTMENT LOGIC IS MY TERM FOR THE THOUGHT TO BE PUT IN BEHIND INVESTMENT. YOU CERTAINLY MIGHT HAVE USED IT AT LEAST ONCE TILL NOW. SAY FOR EXAMPLE YOU BUY CLOTHES IN AN OFF-SEASON SALE,THAT SAVES YOU MONEY, SO THIS IS PLAIN LOGIC,THE ONLY THING IS THAT HERE YOU ARE SAVING RATHER THAN INVESTING .SO HOW TO APPLY THE SAME LOGIC TOWARDS STOCK MARKET.AS USUAL I HAVE AN EXAMPLE UP MY SLEEVE. LETS SAY THAT IT RAINS HEAVILY THIS YEAR AND IT FLOODS ALL OVER INDIA(I HOPE IT DOESN'T).NOW THIS IS A CALAMITY AND BRINGS ALONG HUGE AMOUNT OF HUMAN AS WELL AS INFRASTRUCTURAL LOSS.THE SHARE MARKET DWINDLES AS A RESULT(SINCE ALL KIND OF TRADE IS AFFECTED).BUT THERE IS ANOTHER SIDE TO THE COIN.THIS MASSIVE DESTRUCTION WILL GENERATE MASSIVE DEVELOPMENT OPPORTUNITY.BETTER INFRASTRUCTURE NEEDS TO BE CREATED TO AVOID THE RECURRENCE.THUS IF NEW ROADS,NEW COLONIES,NEW DAMS,DUCTS AND SEWAGE LINES ARE TO BE CONSTRUCTED THEN THE INFRASTRUCTURAL COMPANIES ARE GOING TO GET WHOLE LOT OF WORK,WHICH IMPLIES PROGRESS OR GROWTH FOR THESE COMPANIES.SO IF YOU INVEST IN INFRASTRUCTURE COMPANY DURING THE FLOODS AND IF IT GETS A HUGE DEVELOPMENT CONTRACT THEN YOU CERTAINLY ARE GOING TO PROFIT THE MOST.THE SAME CAN BE TRUE FOR CEMENT AND STEEL MANUFACTURERS AS WELL. I CAN GIVE YOU A LOT PLEASING EXAMPLE RATHER THAN THE FLOOD ONE. INDIA IS ORGANIZING THE 2010 COMMON WEALTH GAMES.THIS EVENT HAS GIVEN RISE TO VARIOUS NEEDS LIKE HUGE STADIUMS,ATHLETE'S VILLAGE,GOOD ROAD CONNECTIVITY,A GOOD TRANSPORT SYSTEM, URBAN DEVELOPMENT WORKS ,etc. NOW WHO ARE GOING TO BENEFIT FROM IT? OBVIOUSLY INFRASTRUCTURAL COMPANIES,STEEL MANUFACTURERS,CEMENT MANUFACTURERS ARE GOING TO BE THE PRIME BENEFICIARIES SO ISN'T IT WISE TO INVEST IN THEM DURING THAT PERIOD? SO EVEN THOUGH I CALL IT INVESTMENT LOGIC ITS PURE COMMON SENSE,YOU JUST NEED TO KEEP YOU EYES WIDE OPEN TO GRAB THE OPPORTUNITY .

WHAT NEXT?

WELL IF THATS THE QUESTION ARISING IN YOUR MIND THEN THIS POST OF MINE SHOULD ANSWER IT.

YOU HAVE OPENED THE DEMAT ACCOUNT,SOME OF YOU MIGHT HAVE APPLIED FOR IPOs AND WAITING FOR THEIR LISTING, AND SOME MIGHT BE JUST DRAWING A BLANK LOOK.ITS QUITE OBVIOUS THAT YOU FEEL LOST.WITH THE HEAVY INFLUX OF INFORMATION ON T.V YOU CERTAINLY GET CONFUSED.MY SIMPLE TECHNIQUE TOO GET THROUGH THIS IS,LISTENING TO YOUR MIND AND DEPENDING ON YOUR RESEARCH.

I WILL, AS USUAL, PROVIDE YOU A SMALL EXAMPLE AS TO WHAT YOU NEED TO DO.
IF YOU HAVE AN ONLINE ACCOUNT,THEN THIS WORKS THE BEST.
LIST DOWN TEN(EVEN MORE COULD DO) COMPANIES WHICH YOU FEEL ARE EVERGREEN OR WHICH ARE MAJOR PLAYERS IN THEIR RESPECTIVE FIELD.LIST THEM IN YOUR ONLINE ACCOUNT AND FOLLOW THEM CLOSELY DAY IN DAY OUT.BUY THEIR SHARES WHEN THE PRICE GOES DOWN CONSIDERABLY,VICE - VERSA SELL THEM WHEN THE PRICE RISES TO EARN PROFIT.

NOW WHY DID I TELL YOU TO SELECT SOME REALLY BIG COMPANIES? BECAUSE EVEN IF THERE IS SLIGHT UP AND DOWN IN THEIR PRICES,THEY DO SHOW A STEADY RISE OVER A PERIOD OF TIME.
COMPANIES LIKE RELIANCE INDUSTRIES,INFOSYS TECHNOLOGIES, TECH-MAHINDRA , BHARTI AIRTEL, LARSON AND TUBRO, HLL, ITC, TELCO,BAJAJ, ETC HAVE GARNERED GREAT TRUST OVER DECADES AND ARE EXPANDING WORLD OVER.BUYING THEIR SHARES WHEN AVAILABLE AT LOWER PRICES AND SELLING THEM OFF AT HIGHER PRICES IS THE SAFEST BET.
YOU WON'T BELIEVE IF I TELL YOU THAT INFOSYS'S SHARE WHICH IS CURRENTLY PRICED AT AROUND Rs 2000/- WAS INITIALLY PRICED BELOW Rs 100/- ONLY , THAT MEANS THE NET WORTH IS 20 TIMES MORE NOW.

HOW TO SELECT THESE COMPANIES?
ITS THE EASIEST ,BIG COMPANIES ARE THOSE WHICH HAVE GREAT DAY TO DAY PRESENCE IN YOUR LIFE.YOU SEE BAJAJ'S BIKES EVERYWHERE,MARUTI CARS ARE OMNIPRESENT,AIRTEL IS RULING THE MOBILE NETWORK,TATAS HAVE PRESENCE EVERYWHERE FROM CARS,BUSES,TEA AND WHAT NOT.
YOU KEEP ON HEARING ABOUT LARSON AND TUBRO BUILDING HUGE PROJECTS,AMBANI BROTHERS ACQUIRING NEW COMPANIES,etc.
THATS WHAT BIG COMPANIES HAVE ,WHAT I CALL AS,"A BIG PRESENCE"

ITS RAINING IPOs

WELL THE MONSOON MIGHT BE GIVING A DITCH TO EVERYONE BUT ITS RAINING IPOs LITERALLY.AS IF DLF AND VISHAL RETAIL IPOs OPENING ON THE SAME DAY WASN'T ENOUGH WE HAVE ICICI JOINING THE WAGON.THEY WOULD BE OUT WITH THEIR IPOs PRETTY SOON,AND THE MARKET IS ALREADY BUZZING WITH EXCITEMENT.
PART OF THE EXCITEMENT CAN BE REDEEMED BY THE FACT THAT THE NAME ICICI ITSELF HAS GAINED A LOT OF TRUST WHICH WILL REFLECT IN THE IPOs PERFORMANCE.

BUT LEAVING ASIDE THE BRAND VALUE OF ICICI ,THIS IPO FOR THE FIRST TIME OFFERS AN UNIQUE OPPORTUNITY FOR RETAIL INVESTORS ( i:e SMALL INVESTORS LIKE YOU AND ME).IT HAS SOME LUCRATIVE OFFERINGS WHICH JUST CAN'T BE OVERLOOKED , HERE ARE SOME OF THEM TO CHEW ON

1.THE PRICE OF THE SHARE CAN BE PAID IN INSTALLMENTS( THIS BANKING PEOPLE CAN SELL ANYTHING IN INSTALLMENTS).THUS WE THE VALUE OF EACH SHARE TURNS OUR TO BE Rs 800/- (JUST AN EXAMPLE) YOU CAN PAY FIRST INSTALLMENT OF Rs 250/- WHILE BIDDING, SECOND INSTALLMENT OF Rs 250/- ON RECEIVING THE SHARES,AND THE PENDING AMOUNT ANYTIME WITHIN THE NEXT SIX MONTHS.

ICICI WILL DECLARE THE PRICE BAND ON 18TH JUNE,WHICH WILL GIVE US A BETTER PICTURE.EVEN THOUGH THE NUMBERS MIGHT CHANGE THE BASIC TRANSACTION WOULD REMAIN SAME.

2.TO ADD TO THE EASY INSTALLMENTS OPTION,RETAIL INVESTORS AND OLD SHARE HOLDERS HAVE BEEN OFFERED 5% DISCOUNT.EVEN IF ITS JUST 5% IT TRANSPIRES TO QUITE A LOT LATER.

AS THE OFFER GOES PUBLIC FURTHER DETAILS WILL TRANSPIRE AND I SURELY WILL LET YOU KNOW.FOR NOW YOU COULDN'T HAVE ASKED FOR A BETTER START TO YOUR TRADING CAREER.