Lanco Infratech Ltd has announced that consequent upon the approval of the members for the sub-division of the equity shares by passing the Resolutions through Postal Ballot and Minutes of the same recorded on December 14, 2009, the Board of Directors of the Company vide Resolution passed by Circulation, approved and fixed January 05, 2010, as the record date for giving effect to the Sub-division of One Fully paid up Equity Share of Face Value of Rs. 10/- (Rupees Ten only) each into Ten Equity Shares of Face Value of Re. 1/- (Rupee One only) each fully paid up.
The stock closed the day at Rs.536.35, down by Rs.14.60 or 2.65%. The stock hit an intraday high of Rs.558.65 and low of Rs.532.
The total traded quantity was 423049 compared to 2 week average of 366438.
Friday, December 18, 2009
Wells Fargo Common Stock Offering Raises $12.25 Billion through offer of 489.9 million shares
SAN FRANCISCO: Wells Fargo & Company (NYSE: WFC) said today that underwriters in Wells Fargo's public offering of 426 million shares of common stock have fully exercised their option to purchase an additional 63.9 million shares. This represents 15 percent of the shares purchased in the original offering.
The combination of the original offering of 426 million shares of common stock plus the additional 63.9 million shares results in a total offering of 489.9 million shares of common stock valued at $12.25 billion.
"We are very pleased with the positive reception for this equity offering, and we appreciate the confidence investors have demonstrated in Wells Fargo's strength and future prospects," said Wells Fargo Chief Financial Officer Howard Atkins.
Under terms of the TARP redemption agreement approved by U.S. banking regulators, this increase in size eliminates the requirement to execute asset sales to generate $1.5 billion in equity.
The offering is expected to be complete and proceeds received December 18, 2009. The original offering was announced December 14 and priced December 15. Wells Fargo will use the proceeds of this offering to redeem its series D preferred stock from the U.S. Treasury for $25 billion, repaying in full the government's TARP investment.
Wells Fargo Securities and Goldman Sachs & Co. are acting as lead underwriters for the offering.
Copies of the registration statement (including the base prospectus), the prospectus supplement and other documents Wells Fargo has filed with the SEC containing more complete information about Wells Fargo and the offering are available for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, Wells Fargo, any underwriter or any dealer participating in the offering will arrange to send investors the prospectus if requested by contacting Wells Fargo Securities, LLC, 375 Park Avenue, New York, NY 10152-4077, toll-free telephone: 1-800- 326-5897, or by emailing equity.syndicate@wachovia.com or Goldman, Sachs & Co., Prospectus Department, 85 Broad Street, New York, NY 10004, toll-free telephone: 1-866-471-2526, facsimile: 1-212-902-9316, or by emailing prospectus-ny@ny.email.gs.com.
This news release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about Wells Fargo, including statements about when and how the Company will repay TARP. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from forward-looking statements including our ability to access capital markets on favorable terms. For a discussion of factors that could cause actual results to differ from expectations, refer to our reports filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov, including our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009, and our Annual Report on Form 10-K for the year ended December 31, 2008, as amended by our Current Report on Form 8-K filed May 11, 2009.
The combination of the original offering of 426 million shares of common stock plus the additional 63.9 million shares results in a total offering of 489.9 million shares of common stock valued at $12.25 billion.
"We are very pleased with the positive reception for this equity offering, and we appreciate the confidence investors have demonstrated in Wells Fargo's strength and future prospects," said Wells Fargo Chief Financial Officer Howard Atkins.
Under terms of the TARP redemption agreement approved by U.S. banking regulators, this increase in size eliminates the requirement to execute asset sales to generate $1.5 billion in equity.
The offering is expected to be complete and proceeds received December 18, 2009. The original offering was announced December 14 and priced December 15. Wells Fargo will use the proceeds of this offering to redeem its series D preferred stock from the U.S. Treasury for $25 billion, repaying in full the government's TARP investment.
Wells Fargo Securities and Goldman Sachs & Co. are acting as lead underwriters for the offering.
Copies of the registration statement (including the base prospectus), the prospectus supplement and other documents Wells Fargo has filed with the SEC containing more complete information about Wells Fargo and the offering are available for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, Wells Fargo, any underwriter or any dealer participating in the offering will arrange to send investors the prospectus if requested by contacting Wells Fargo Securities, LLC, 375 Park Avenue, New York, NY 10152-4077, toll-free telephone: 1-800- 326-5897, or by emailing equity.syndicate@wachovia.com or Goldman, Sachs & Co., Prospectus Department, 85 Broad Street, New York, NY 10004, toll-free telephone: 1-866-471-2526, facsimile: 1-212-902-9316, or by emailing prospectus-ny@ny.email.gs.com.
This news release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about Wells Fargo, including statements about when and how the Company will repay TARP. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from forward-looking statements including our ability to access capital markets on favorable terms. For a discussion of factors that could cause actual results to differ from expectations, refer to our reports filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov, including our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009, and our Annual Report on Form 10-K for the year ended December 31, 2008, as amended by our Current Report on Form 8-K filed May 11, 2009.
Citi Partners with India Post for Landmark Remittances Solution
Hong Kong รข€“ Citi has announced a landmark partnership with the Department of Post, Government of India (India Post) to enhance its recently launched MO Videsh remittance product. This international remittance service is powered by Citi's innovative WorldLink® Payment Services, and provides India Post the ability to send payments in more than 130 currencies globally through its existing Eurogiro payments platform.
Under the partnership, India Post will provide global remittance services to its customers in more than 800 head post offices across the country within three months. India Post plans to extend the service to more than 8,000 post offices nationwide within one year.
This deal is significant for both Citi and India Post, leveraging the Citi and Eurogiro partnership to provide India Post with the widest range of currencies globally. Citi's partnership with Eurogiro was established in August 2007 to enable members of Eurogiro, a low value payments network of postal organizations and financial institutions, access to Citi's existing distribution capacity and payment solutions.
With more than 25 years of experience, WorldLink Payment Services is at the forefront of the cross-border payments industry with its powerful and flexible multicurrency platform. Processing more than US$750 billion in transactions annually, WorldLink is the entrusted provider of cross border payment solutions to more than 2,700 client relationships globally, including the public sector, financial institutions, corporations and third party administrators.
Anthony Nappi, Managing Director, Regional Head of Global Transaction Services, Asia Pacific, Citi, said, "This innovative service launch between Citi Global Transaction Services and India Post represents a landmark in the Indian remittances space and clearly sets a new market standard. We are proactively taking a unique approach to meeting the needs of key client segments and remain committed to creating partnerships with post offices regionally and globally based on their future business needs."
"The payments partnership between India Post and Citi demonstrates Eurogiro's strength to bring together the postal and the banking world through the Eurogiro payments platform and global community," notes Juanita Woodward, Director, Customer Relations Asia Pacific, Eurogiro A/S. India Post is the most recent postal organization to join the Eurogiro payments network community, which has members located in more than 50 countries, and illustrates an increased focus by postal organizations around the globe to expand international payment services to the local community through the Eurogiro payments network and community.
Under the partnership, India Post will provide global remittance services to its customers in more than 800 head post offices across the country within three months. India Post plans to extend the service to more than 8,000 post offices nationwide within one year.
This deal is significant for both Citi and India Post, leveraging the Citi and Eurogiro partnership to provide India Post with the widest range of currencies globally. Citi's partnership with Eurogiro was established in August 2007 to enable members of Eurogiro, a low value payments network of postal organizations and financial institutions, access to Citi's existing distribution capacity and payment solutions.
With more than 25 years of experience, WorldLink Payment Services is at the forefront of the cross-border payments industry with its powerful and flexible multicurrency platform. Processing more than US$750 billion in transactions annually, WorldLink is the entrusted provider of cross border payment solutions to more than 2,700 client relationships globally, including the public sector, financial institutions, corporations and third party administrators.
Anthony Nappi, Managing Director, Regional Head of Global Transaction Services, Asia Pacific, Citi, said, "This innovative service launch between Citi Global Transaction Services and India Post represents a landmark in the Indian remittances space and clearly sets a new market standard. We are proactively taking a unique approach to meeting the needs of key client segments and remain committed to creating partnerships with post offices regionally and globally based on their future business needs."
"The payments partnership between India Post and Citi demonstrates Eurogiro's strength to bring together the postal and the banking world through the Eurogiro payments platform and global community," notes Juanita Woodward, Director, Customer Relations Asia Pacific, Eurogiro A/S. India Post is the most recent postal organization to join the Eurogiro payments network community, which has members located in more than 50 countries, and illustrates an increased focus by postal organizations around the globe to expand international payment services to the local community through the Eurogiro payments network and community.
McDonough to retire from Bank of America Merrill Lynch
NEW YORK - Bank of America (NYSE:BAC) announced the retirement of William J. McDonough, effective December 31. The former president of the Federal Reserve Bank of New York and former chairman of the Public Company Accounting Oversight Board, McDonough joined Merrill Lynch & Co. nearly four years ago as vice chairman and special advisor to the chairman and continued in this role at Bank of America Merrill Lynch. McDonough advised senior management and was actively involved in business development efforts with governments and financial institutions around the world.
While at the Fed from 1993 to 2003, McDonough played a key role in efforts to preserve liquidity in the financial markets after the attacks of September 11, 2001, and was instrumental in successful efforts to recapitalize Long Term Capital Management after its financial problems in 1998. During this time, he also served as vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy. McDonough also was a member of the Board of Directors of the Bank for International Settlements and chairman of the Basel Committee on Banking Supervision. Earlier he was vice chairman of First Chicago Corp., and its bank, First National Bank of Chicago. McDonough is also a senior member of the Group of Thirty, an influential Washington-based financial advisory body.
"Bill McDonough has been at the pinnacle of financial services industry for decades," stated Kenneth D. Lewis, chief executive officer of Bank of America Corporation. "Having known Bill for many years, I'd like to thank him for his many contributions, specifically to our company and more broadly to our industry as a leader in both the public and private sectors."
"Bill McDonough has one of the finest minds in public policy," said Anne Finucane, global chief strategy and marketing officer at Bank of America. "Our company, the legacy Merrill Lynch firm, and the senior managers who have worked with Bill have greatly benefited from his expert insights, thoughtful counsel and wealth of relationships."
Prior to his career with First Chicago, McDonough was with the U.S. State Department from 1961 to 1967 and the U.S. Navy from 1956 to 1961.
McDonough is currently a member of the board of directors of the New York Philharmonic Orchestra. He is also Chairman of the Investments Committee for the United Nations Joint Staff Pension Fund.
McDonough earned a master's degree in economics from Georgetown University in Washington, D.C. and a bachelor's degree, also in economics, from Holy Cross College in Worcester, Massachusetts.
While at the Fed from 1993 to 2003, McDonough played a key role in efforts to preserve liquidity in the financial markets after the attacks of September 11, 2001, and was instrumental in successful efforts to recapitalize Long Term Capital Management after its financial problems in 1998. During this time, he also served as vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy. McDonough also was a member of the Board of Directors of the Bank for International Settlements and chairman of the Basel Committee on Banking Supervision. Earlier he was vice chairman of First Chicago Corp., and its bank, First National Bank of Chicago. McDonough is also a senior member of the Group of Thirty, an influential Washington-based financial advisory body.
"Bill McDonough has been at the pinnacle of financial services industry for decades," stated Kenneth D. Lewis, chief executive officer of Bank of America Corporation. "Having known Bill for many years, I'd like to thank him for his many contributions, specifically to our company and more broadly to our industry as a leader in both the public and private sectors."
"Bill McDonough has one of the finest minds in public policy," said Anne Finucane, global chief strategy and marketing officer at Bank of America. "Our company, the legacy Merrill Lynch firm, and the senior managers who have worked with Bill have greatly benefited from his expert insights, thoughtful counsel and wealth of relationships."
Prior to his career with First Chicago, McDonough was with the U.S. State Department from 1961 to 1967 and the U.S. Navy from 1956 to 1961.
McDonough is currently a member of the board of directors of the New York Philharmonic Orchestra. He is also Chairman of the Investments Committee for the United Nations Joint Staff Pension Fund.
McDonough earned a master's degree in economics from Georgetown University in Washington, D.C. and a bachelor's degree, also in economics, from Holy Cross College in Worcester, Massachusetts.
Aurobindo Pharma gets final approval for Cetirizine Hydrochloride Syrup (Rx)
Aurobindo Pharma Ltd is pleased to announce that it has received the final approval for Cetirizine Hydrochloride Syrup 1mg/mL (ANDA No 090751) from the US Food & Drug Administration (USFDA). This approval of Cetirizine Hydrochloride Syrup is under Prescription drug product category.
Cetirizine Hydrochloride Syrup 1mg/mL is the generic equivalent of McNeil Consumer Healthcare Zyrtec Syrup 1mg/mL. Cetirizine Hydrochloride Syrup is indicated for the relief of symptoms associated with seasonal allergic rhinitis in adults and children above 2 years of age and falls under the Anti-Allergic segment.
Aurobindo has a total of 110 ANDA approvals (82 Final approvals and 28 Tentative approvals) from USFDA.
The stock was trading at Rs.891, up by Rs.11.65 or 1.32%. The stock hit an intraday high of Rs.894.20 and low of Rs.875.15.
The total traded quantity was 20109 compared to 2 week average of 41335.
Cetirizine Hydrochloride Syrup 1mg/mL is the generic equivalent of McNeil Consumer Healthcare Zyrtec Syrup 1mg/mL. Cetirizine Hydrochloride Syrup is indicated for the relief of symptoms associated with seasonal allergic rhinitis in adults and children above 2 years of age and falls under the Anti-Allergic segment.
Aurobindo has a total of 110 ANDA approvals (82 Final approvals and 28 Tentative approvals) from USFDA.
The stock was trading at Rs.891, up by Rs.11.65 or 1.32%. The stock hit an intraday high of Rs.894.20 and low of Rs.875.15.
The total traded quantity was 20109 compared to 2 week average of 41335.
KEC International secures six new projects worth Rs 550 crores
KEC International Ltd. (KEC), a global leader in the power transmission EPC business and a part of the Rs. 15,000 crore RPG Group, has won major orders in Algeria and Abu Dhabi worth Rs. 474 crore and Rs. 76 crore respectively, against international competition.
In Algeria, for CEEG Spa, KEC will undertake five turnkey projects of 400 KV, 200 KV and 60 KV covering both single and double circuit transmission lines worth Rs. 474 crore. The total length of these five projects is 858 km and the completion period ranges from 12 to 18 months.
In Abu Dhabi. KEC will execute a project of modification and realiocation on existing lines with design and supply of Emergency Line Restoration System (ERS) in Ruwais & Shuweihat for Abu Dhabi Transport Authority / Ghantoot Transport & Gen. Cont. Est. This project is to be completed within 12 months. The value of this order is Rs. 76 crore.
"In Abu Dhabi we are diversifying our client base and we will perform our first International ERS (Emergency Line Restoration System) project," said Mr. Ramesh Chandak, MD & CEO, KEC International Ltd.
The stock was trading at Rs.583.05, up by Rs.15.55 or 2.74%. The stock hit an intraday high of Rs.589.90 and low of Rs.571.
The total traded quantity was 47221 compared to 2 week average of 28258.
In Algeria, for CEEG Spa, KEC will undertake five turnkey projects of 400 KV, 200 KV and 60 KV covering both single and double circuit transmission lines worth Rs. 474 crore. The total length of these five projects is 858 km and the completion period ranges from 12 to 18 months.
In Abu Dhabi. KEC will execute a project of modification and realiocation on existing lines with design and supply of Emergency Line Restoration System (ERS) in Ruwais & Shuweihat for Abu Dhabi Transport Authority / Ghantoot Transport & Gen. Cont. Est. This project is to be completed within 12 months. The value of this order is Rs. 76 crore.
"In Abu Dhabi we are diversifying our client base and we will perform our first International ERS (Emergency Line Restoration System) project," said Mr. Ramesh Chandak, MD & CEO, KEC International Ltd.
The stock was trading at Rs.583.05, up by Rs.15.55 or 2.74%. The stock hit an intraday high of Rs.589.90 and low of Rs.571.
The total traded quantity was 47221 compared to 2 week average of 28258.
ONGC Board declares Interim Dividend of 180% for 2009-10
Oil & Natural Gas Corporation Ltd (ONGC) has announced that the Board of Directors of the Company at its meeting held on December 18, 2009, have declared an Interim Dividend of Rs. 18 (Rs. Eighteen) per equity share of Rs. 10 each for the Financial Year 2009-10.
The stock closed the day at Rs.1185.50, down by Rs.14.10 or 1.18%. The stock hit an intraday high of Rs.1205 and low of Rs.1182.
The total traded quantity was 44294 compared to 2 week average of 76016.
The stock closed the day at Rs.1185.50, down by Rs.14.10 or 1.18%. The stock hit an intraday high of Rs.1205 and low of Rs.1182.
The total traded quantity was 44294 compared to 2 week average of 76016.
Websol Energy to approve allotment of bonus shares on Dec 30, 2009
Websol Energy Systems Ltd has announced that a meeting of the Board of Directors of the Company will be held on December 30, 2009 to approve the allotment of Bonus Shares to the Members of the Company whose names appear on the Register of Members as on the Record Date.
The stock was trading at Rs.365, up by Rs.0.70 or 0.19%. The stock hit an intraday high of Rs.370 and low of Rs.360.10.
The total traded quantity was 4881 compared to 2 week average of 3629.
The stock was trading at Rs.365, up by Rs.0.70 or 0.19%. The stock hit an intraday high of Rs.370 and low of Rs.360.10.
The total traded quantity was 4881 compared to 2 week average of 3629.
Jaiprakash Hydro-Power
With reference to the earlier announcement dated December 14, 2009 regarding (Sanction of Scheme of Amalgamation of Jaiprakash Power Ventures Ltd. with Jaiprakash Hydro Power Ltd), Jaiprakash Hydro Power Ltd has informed BSE that formal order dated December 14, 2009, has been received from Hon'ble High Court of Himachal Pradesh at Shimla and the same has been filed with the Registrar of Companies, Punjab, Himachal Pradesh & Chandigarh on December 14, 2009 making the Scheme of Amalgamation effective from December 14, 2009. Necessary formalities of change of name of the Company to Jaiprakash Power Ventures Ltd., in terms of the Scheme, are being carried out with the Registrar of Companies, Punjab, Himachal Pradesh & Chandigarh.
Saturday, December 5, 2009
SMS tariff war
The battle continues - will the customer win the war? The tariff war in the mobile telecom industry has now extended and shifted its focus to the Short Messaging Services (SMSes). Dual technology player Reliance Communications (RCom) has triggered a tariff war in the SMS segment. The company has launched two SMS plans which are available to both pre-paid and post paid users of the GSM and CDMA service.
SMSes under one plan will be charged at 1 paisa per SMS, but in order to avail of the same, users would have to pay a monthly fee of Rs 11. In another plan the users can avail of 15,000 SMSes free, by paying Re 1 per day as a fee. In other words it means 500 SMSes per day for a rupee charged; a great offer.
The above plans will be appealing to customers with high SMS usage – typically youth and professionals across India.
The tariff war is likely to continue till consolidation sets in the mobile telecom industry.
Since the mobile telecom industry is more voice driven, the move may not have too much impact on the industry. However, it will indeed be pro-customer as it will lead to increase in savings.
SMSes under one plan will be charged at 1 paisa per SMS, but in order to avail of the same, users would have to pay a monthly fee of Rs 11. In another plan the users can avail of 15,000 SMSes free, by paying Re 1 per day as a fee. In other words it means 500 SMSes per day for a rupee charged; a great offer.
The above plans will be appealing to customers with high SMS usage – typically youth and professionals across India.
The tariff war is likely to continue till consolidation sets in the mobile telecom industry.
Since the mobile telecom industry is more voice driven, the move may not have too much impact on the industry. However, it will indeed be pro-customer as it will lead to increase in savings.
IPO subscription to be made easy for HNIs & firms
From January 2010, HNIs and firms will be eligible to use the banking channel called Application Supported by Blocked Amount (ASBA) to buy stocks in the primary (IPO) market.
Under this channel, when an investor applies to an IPO, the funds do not immediately flow out from his account. The bank blocks the value of the shares applied for and the funds are not disbursed till the shares are allotted. Customers cannot use this money, since it is blocked.
Earlier in July 2008, SEBI allowed only retail investors to subscribe to IPOs through this channel, but capped the maximum amount of bid at Rs 1 lakh.
As a second phase, the channel will now be thrown open to a wider group of investors who will be able to make multiple applications at different prices within the price band of an IPO.
SEBI has asked banks to be ready with their software and to make necessary changes in their software.
We believe that the move will reduce the time taken between the public issue and listing. This will be in the interest of investors as it will make IPO subscriptions easy and ensure hassle-free transactions. Investors will no longer have to wait for the receipt of refund cheques.
Dubai debt trap
Dubai, which is seen as the global financial hub, got into a debt trap with Dubai World struggling with liabilities to the tune of USD 59 billion. The Dubai Government too hasn’t guaranteed the debt of Dubai World. As per a government statement, the company has received financing based on a project schedule basis and not on government guarantees.
This sent shock waves across the financial markets, significantly impacting stock prices across the globe. S&P too has cut the credit ratings of six Dubai government-linked companies, including ports operator DP World, to junk status. S&P also placed the ratings of four Dubai-based banks on negative outlook, due to their exposure to Dubai World.
This sent shock waves across the financial markets, significantly impacting stock prices across the globe. S&P too has cut the credit ratings of six Dubai government-linked companies, including ports operator DP World, to junk status. S&P also placed the ratings of four Dubai-based banks on negative outlook, due to their exposure to Dubai World.
Banning insurance commissions
The panel constituted last year, chaired by D Swarup, the Chairman of the Pension Fund Regulatory and Development Authority (PFRDA) presented its report to the Government. The panel was asked among other things:
- How to stop mis-selling of financial products
- How to raise financial literacy among citizens
With respect to the insurance industry, the panel has recommended in its report, that the up-front commissions embedded in the premium should be done away in a phased manner as under:
| Year | Commissions |
| 2009 | 15% |
| 2010 | 7% |
| 2011 | 0% |
The main intention of the panel is to stop mis-selling of products as agents and financial advisors often push financial products where they can earn more, without the investors in mind.
The move has been opposed by the Insurance Regulatory & Development Authority (IRDA) and Life Insurance Council, the industry lobby for the insurance sector.
We believe that if the recommendations to do away with insurance commissions go through government approvals, it will be in the interest of the investors.
Banking made easy?
PersonalFN Impact Indicator
In a move to make banking transactions more easy and convenient, the Reserve Bank of India (RBI) permitted banks to adopt the ‘Business Correspondents Model’ from Monday – November 30, 2009.
It means banks will now be able to appoint ‘Business Correspondents’ (BCs) enabling them (banks) to deepen the banking system. RBI has allowed entities like individual kirana/medical/fair price shop owners, PCO operators, agents of government-sponsored small savings schemes, insurance agents, petrol pumps owners and retired teachers to act as BCs of banks.
The principle for appointing such BCs are:
- Experience of these individuals in cash handling (cash inflow and outflow)
- Being residents of the area in which they propose to operate
According to RBI, the charges for services provided by the BCs, will be levied in a transparent manner and BCs will not be allowed to charge customers directly.
The model has evolved after experiencing limitations in the traditional ‘brick and mortar' banking model. As per RBI notification, the new model (Business Correspondents Model) will enable banks to accelerate their goal of financial inclusion.
However, we believe that though the move seems to make banking easier and convenient, there are some serious operational glitches like cash management, security and technology, which need to be considered for safe banking.
India's GDP beats forecast
The Gross Domestic Product (GDP) expanded during the second quarter (July – September) of the fiscal year 2010 by 7.9%. The key drivers for this strong figure are:
- Pickup in manufacturing sector
- Increased government expenditure
- Robust investments
- Lower interest rates
- Higher government salaries & pay commission arrears
- Increased incomes especially in the rural areas due to greater social spending and high farm goods prices
- Modest growth in farm output despite drought
In the first quarter (April – June) of the present fiscal year, the economy had expanded 6.1%. Interestingly now, the growth is close to the same level (i.e. 7.7%), of the second quarter (July – September 2008) of the fiscal year 2009, thus indicating that the economy is back on the health track. The stock market too has cheered this news during the week.
Given the attractive GDP numbers, we believe there are likely chances of:
- Government withdrawing stimulus – certainly beginning the phasing out over next few months
- RBI tightening interest rates soon
How to select a mutual fund?
Mutual funds offer the most convenient way of investing in equity, debt and money markets. The increased participation of Indian investors bears testimony to the fact that there is a widespread realisation of the same. Also over the years, the Indian mutual fund industry has grown manifolds, not only in terms of size but also in terms of offerings. While on one hand that is good; the increased number of offerings has also given rise to a state of dilemma in the mind of investors. They often get confused when it comes to selecting the right fund from the plethora of funds available. And even worse, many investors think that 'any' mutual fund can help them achieve their desired goals.
The fact is, not all funds are the same. There are various aspects within a fund that an investor must carefully consider before short-listing it for making investments. In this article we highlight some of those aspects.
- Performance: The past performance of a fund is important in analysing a mutual fund. However, one must remember that simply because a fund has performed well in the past does not mean that it will perform well in the future as well. It simply indicates the fund’s ability to clock returns across market conditions. And if the fund has a well-established track record, the likelihood of it performing well in the future is higher than a fund which has not performed well.
The following factors should be considered while evaluating a fund’s performance:
1) Comparisons: A fund’s performance in isolation does not indicate anything. Hence, it becomes crucial to compare the fund with its benchmark index and its peers, so as to deduce a meaningful inference. Again, one must be careful while selecting the peers for comparison. For instance, it doesn’t make sense comparing the performance of a midcap fund to that of a largecap.
‘Don’t compare apples with oranges’
2) Time period: It’s pertinent for investors to have a long term (atleast 3-5 years) horizon if they wish to invest in equity oriented funds. Hence, it becomes important for them to evaluate the long term performance of the funds. This does not imply that the short term performance be ignored. Performance over the short term should also be evaluated; however, the focus should be more on the long term performance. Besides, it is equally important to evaluate how a fund has performed over different market cycles (especially during the downturn). During a rally it is easy for a fund to deliver above-average returns; but the true measure of its performance is when it posts superior returns than its benchmark and peers during the downturn.
Choose a fund like you choose a wife – one that will stand by you in sickness and in health
3) Returns: Returns are obviously one of the important parameters that one must look at while evaluating a fund. But remember, although it is one of the most important, it is not the only parameter. Many investors simply invest in a fund because it has given higher returns. In our opinion, such an approach for making investments is flawed. In addition to the returns, investors must also look at the risk parameters, which in-turn explain how much risk the fund has taken to clock higher returns.
4) Risk: Risk is normally measured by Standard Deviation. It signifies the degree of risk the fund has exposed its investors to. Higher the Standard Deviation, higher the risk taken by the fund to clock returns. From an investor’s perspective, evaluating a fund on risk parameters is important because it will help them to check whether the fund’s risk profile is in line with their risk profile or not. For example, if two funds have delivered similar returns, then a prudent investor will invest in the fund which has taken less risk.
5) Risk-adjusted return: This is normally measured by Sharpe Ratio. It signifies how much return a fund has delivered vis-ร -vis the risk taken. Higher the Sharpe Ratio, better is the fund’s performance. From an investor’s perspective it is important because they should choose a fund which has delivered higher risk-adjusted returns. Infact, this ratio tells us whether the high returns of a fund are attributed to good investment decisions, or to higher risk.
6) Portfolio Concentration: Funds that have a high concentration in particular stocks or sectors tend to be very risky and volatile. Hence, investors should invest in these funds only if they have a high risk appetite. Ideally, a well diversified fund should hold no more than 40% of its assets in its top 10 stock holdings.
Make sure your fund does not put all its eggs in one basket
7) Portfolio Churning: The portfolio turnover rate measures the frequency with which stocks are bought and sold. Higher the churning, higher the volatility. The fund might not be able to compensate the investors adequately for the higher risk taken.
Invest in funds with a low turnover rate
- Fund Management: The performance of a mutual fund scheme is largely linked to the Fund Manager and his team. Hence, it’s important that the team managing the fund should have considerable experience in dealing with market ups and downs. Also, investors should avoid fund’s that owe their performance to a ‘star’ fund manager. Even if the fund manager is present today, he might quit tomorrow, and then the fund will be unable to deliver its ‘star’ performance without its ‘star’ fund manager. Therefore, the focus should be on the fund houses which are strong in their systems and processes.
Fund house should be process-driven and not 'star' fund-manager driven
- Costs: If two funds are similar in most contexts, it might not be worth buying the high cost fund if it is only marginally better than the other. Simply put, there is no reason for an AMC to incur higher costs, other than its desire to have higher margins.
The two main costs incurred are:
1) Expense Ratio: Annual expenses involved in running the mutual fund include administrative costs, management salary, overheads etc. Expense Ratio is the percentage of assets that go towards these expenses. Every time the fund manager churns his portfolio, he pays a brokerage fee, which is ultimately borne by investors in the form of an Expense Ratio. Therefore, higher churning not only leads to higher risk but also higher cost for the investor.
2) Exit Load: Due to SEBI’s recent ban on entry loads, investors now have only exit loads to worry about. An exit load is charged to investors when they sell units of a mutual fund within a particular tenure; most funds charge if the units are sold before a year. As exit load is a fraction of the NAV, it eats into your investment.
Try investing in a fund with a low expense ratio and stay invested in them for longer duration.
Among the factors listed above, while few can be easily gauged by investors, there are others on which information is not widely available in public domain. This makes analysis of a fund difficult for investors and this is where the importance of taking the help of a mutual fund advisor comes into fore. At Personal FN, we spend a lot of time and effort in short-listing funds which are best for investors, by using various qualitative and quantitative techniques.
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