Igniting Intellect: May 2011

May 19, 2011

How to invest in mutual funds online?

Posted: 19 May 2011 08:24 AM PDT

I have been asked this questions lot of times. This question has become more relevant ever since SEBI has banned the entry load on mutual. Before answering this question we have to answer one more question, why more and more individual investors are trying to take the online route for investing in mutual funds.

Why investors are shifting to online investing?

This step of SEBI has made independent financial advisors (IFAs) to service individual clients. The advisors, if smart enough, can at the most earn Rs. 50 as upfront fees from an investor wishing to invest Rs. 10000. Earning this Rs. 50 will involve travelling, communication, time and knowledge. Hence many independent advisors have stopped distributing mutual funds. This is making it difficult for investors to execute transactions physically; hence many investors are shifting to online investing.

Why invest online – Advantages of investing in mutual funds online?

No Paperwork – You don't have to fill lengthy complicated forms, submit or get it submitted along with cheque, KYC forms and then wait for physical account statements to know the status of your portfolio. In online you can do all transactions effortlessly with a computer with internet connection and know the status of your account at any point of time.

Alteration at the click of a mouse – You can buy, sell and change the SIP amounts, etc. can be done very easily through online service providers.

Many options under single platform - The biggest benefit of online mode is the ability to invest in multiple funds of different AMCs from one platform and even track the performance by having a single portfolio.

Research Support – get expert advice, research reports, financial calculators, portfolio management services as value add services.

Now the basic and original question with which I started the article with –

How to invest in mutual funds online?

There are various ways you can do this. I am mentioning few of them below –

Independent websites – There are sites which offer online investing services across AMCs. fundsindia.com and fundsupermart.com are two such sites.

Share Brokers – icicidirect.com, sharekhan.com, indiainfoline.com, etc. in addition to stock broking also offer online services for investment in mutual funds. Onetime registration by doing the necessary paperwork is required.

Mutual Fund Websites – You can invest in through each mutual fund's website also. However, there are two major problems – Firstly, for the first time you have to fill up a physical application form and then you can do future transactions under the same folio number. Secondly, you have to register with each mutual fund separately.

Having said all this, many investors still hesitate to invest online and are comfortable having face-to-face interaction with the advisors. If you are one of them then ignore this article, otherwise let me know your views on this by posting comment below.

Author – Vineet Patawari

Interesting Forex Slangs

Posted: 16 May 2011 11:08 PM PDT

Every morning while browsing through the forex market commentaries I usually come across a range of terms used in currency market which either do not exist in real world or exist in a totally different context. Its quite interesting to know these terms and find out why they have been named as such.

Cable

Refers to the Great Britain Pound i.e. GBP/USD currency rate (read our note on currency basics to understand the pair). It refers to the Atlantic Cable, a steel cable laid under the Atlantic Ocean in 1850, telegraphically linking the UK with the USA, enabling messages with currency prices to be transmitted between the London and New York Exchanges. GBPUSD pair is also known as Pound Sterling

Quid

Again refers to the GBPUSD currency pair. I think the term comes from a popular phrase quid pro quo but I am not sure, please check on the reasons of this name.

Kiwi

No prizes for guessing this pair. It is New Zealand's NZDUSD currency pair named after its national bird.

Loonie

This refers to the Canadian dollar i.e. USDCAD currency pair. This is named after the name for Canadian 1 dollar coin.

Chunnel

Referring to the cross between Euro and Pound i.e. EURGBP pair. Infact this term is also a cross between words from English Channel Tunnel linking England and France by rail.

Fiber

Some asking for a quote on Fiber is asking quotes on the most traded EURUSD currency pair. This terminology borrows from the term cable used for GBPUSD reflecting the fact that optic fiber is the modern day equivalent to the telegraph cable that gave GBP/USD its most common nickname. One more reason might be that Euro notes are printed on pure cotton fiber paper and have a security “fiber” woven into each one.

Chief

Refers to Swiss Franc, i.e. the USDCHF currency pair. This term comes from the currency's three-letter ISO 4217 code of CHF.

Geppy

This strange word, in the world of forex refers to cross between British Pound and Japanese Yen i.e. GBPJPY. I think the term has just been formed G and PY in the currency pair.

I am sure there would be many more interesting terms doing rounds in the market among traders and dealers. Do let me know any such terms through a comment on this post.

Author: Praveen Bajaj

Understanding Forex Rates

May 11, 2011

Aanjaneya Lifecare Limited

Posted: 11 May 2011 04:00 AM PDT

Overview- Company and business

Aanjaneya Lifecare limited was incorporated in 2006. The company is a research based pharmaceutical company with manufacturing and marketing capabilities in APIs (Active Pharmaceutical Ingredients) mainly focus on anti-malarial and (Finished Dosage Forms) FDFs. Company is the largest manufacturers if quinine salts in the world. The company started its manufacturing activities in the year 2007. The company also have a small R&D block in Mahad, Maharashtra. Company have a product portfolio of Anti malarials, Animal Health Product and Anti-cancer. The manufacturing facilities have been approved by various regulatory authorities and are ISO 9001-2008 and WHO GMP certified.

Industry Analysis

World pharmaceuticals industry is growing by leaps and bounds and India is showing the most promising signs in the industry with generics constituting a significant portion of Indian pharmaceuticals industry. The Indian generics business is getting special attention and respect from all major leading pharmaceuticals companies across the world. The pharmaceutical industry in India is estimated to be worth about US$ 10 bn, growing at an annual rate of 9%. The global pharmaceutical market grew by 4.8% to reach USD 773 billion in 2008 from USD 715 billion in 2007. The

CAGR for the period 2001-2007 was 10.5%. The two largest markets, the US and Europe, which contributed almost 72.3% to the global market in 2008, achieved growth rates of 1.4% and 5.8% respectively. The European market is expected to grow with a CAGR of 2-5% for 2008–2013.

Objective of the issue

The company aims to raise around Rs 120 crore through the issue of 50 lakh equity shares at higher end of price band of Rs 228-240 a share. The company has decided to utilise Rs. 26.56 crore in for the setting up of the Anti Cancer facility at our existing location in Mahad, which is expected to commence commercial production in April, 2012.

The company has proposed to use Rs. 14.79 crore for the establishment of a cGMP block for manufacturing APIs at our existing location which is expected to commence operations in the September, 2011. The company also propose to use Rs. 8.67 lacs for the establishment of a multipurpose block for manufacturing APIs at our existing location which is expected to commence operations in the April, 2012.

The Research and Development team at, Maharashtra is engaged in improving the processes for existing products thereby improving the cost efficiencies. The company will utilise Rs.19.08 crore for the expansion of our existing R & D centres for lab scale development work.

These are the major money to be utilised after the issue.

Risk Factor

There are several risk factor related to the company which must be kept in mind before investing. The company is involved in certain outstanding proceedings which are pending. Any adverse outcome of the above can harm the smooth running of the business.

The Company entered into a Working Capital Consortium Agreement with State Bank of India and The Shamrao Vithal Cooperative Bank Limited whereby raising a term loan of Rs. 115.07 crore. This entails substantial leverage on the part of the company and increases the financial risk of the company considerably.

The company also have the negative cash flow during the year. If they are not able to generate sufficient cash flows, it may adversely affect our business and financial operations.

			(IN CRORE)
Particulars	2008	2009	2010

Cash flow for operating activity	(2.34)	(21.93)	0.48

Cash flow for financing activity	(10.69)	(2.97)	(38.8

Ipo Grading

Aanjaneya Lifecare limited grading is done by CRISIL. CRISIL Equities has assigned a CRISIL IPO grade of '1/5' to the proposed IPO. The assigned grade reflects the weaker fundamentals and company's limited corporate governance practices.

Key Financials

			(IN CRORE)
Particulars	2008	2009	2010

TOTAL INCOME	22.38	91.15	169.35
TOTAL EXPENDITURE	17.31	80.24	139.56
PAT	2.31	5.1	15.07

Overall view

It is not advisable for the subscriber to subscribe for the IPO. The cash flow of the company is negative which is a warning signal. Moreover the company's financials are not strong. The price of the issue is quite high as compared to the company's strength. The company have many object and fund allocation plans which seems risky.

Author: Satish Tayal, MBA (ISBM) is an intern with Kredent Group

Job Opening: Options Trading with Kredent, Kolkata

Posted: 09 May 2011 11:31 PM PDT

Enter the exciting world of trading options and volatilities….

Inviting applications from experienced options traders for Options trading desk at Kredent Finance, Kolkata

Kredent Finance is one of the largest professional trading firms in Eastern India contributing significantly to market volumes. Our professional trading desk has access to all the asset classes available for trading in India and houses some of the best traders in this part of the country. We are direct clearing and trading members of the NSE, BSE, MCX-SX, MCX, NCDEX and ACE. Visit www.kredent.com for more details.

Position will be based out of Kolkata.

Incumbent should be experienced in trading options in either equities or currencies on Indian markets.

Please forward your resumes to career@kredent.com with the subject line "Options Trading".

Muthoot Finance- Follow up note

Posted: 07 May 2011 04:59 AM PDT

Muthoot Finance Limited, the second IPO in the year 2011 listed at a premium on debut on both NSE and BSE. At NSE Muthoot Finance Limited opened at Rs. 196.60, a premium of 12.34% against the issue price. The issue price was Rs. 175 a share. The script had touched the high price of Rs. 198.90 with a total turnover value of Rs. 1,067.4 crore. Subsequently it had touched an intraday low of Rs. 161.40. MFL finally closed at 172.40 on NSE registering a decline of 1.3% from the issue price.

The issue opened for subscription 18-Apr and closes on 21-Apr with 100% book building process. The price band of the issue of the IPO was Rs. 160-175 and size of the IPO was Rs. 901.25 crore through the issue of 5.15 crore equity shares. The IPO was oversubscribed 24.55 times.

The Way forward for gold loan market

As per the red herring prospectus of the company gold loan market is expected to grow at between 35% to 40% over the next couple of years. Moreover the market is yet not penetrated. It is expected that Gold market will provide enough opportunity for portfolio expansion and retain attractive margin to NBFCs, banks and new entrants. As we know that gold loan market is a huge market in India and it is always in the secure zone. The company had also decided to use the available issue funds to meet future capital requirements to provide for funding of loans to customer.

The Way forward for MFL

Muthoot enjoys the dominant position in the niche gold loan market generating net interest margin of over 10 per cent, return on equity of over 30 percent with huge growth potential and low default risk. MFL is already a largest gold financing firm with a market share of 18-20 per cent.

The closest competitor of MFL is Manappuram which is one-third of Muthoot's size in the gold loan market. Therefore MFL is the flagship in gold loan market.

The net worth of the company has shown an increasing trend. In 2006 net worth of the company was Rs. 90.43 crore which has increased to Rs. 584.19 crore in 2010. The shows the strength of the company and its growing market. Moreover it is also expected that its net profit will reach great heights in coming two years. Net profit of the company has increased from Rs 26.88 crore in the year 2006 to 228.51 crore in 2010.

What should you do now??

It is advisable to hold the share for the long term profit because the company is focusing on long term benefit rather short term gains. The objective and plans of the company are clear. Moreover the industry is growing at a good pace and expected to rise in coming years. Investor may expect returns more than the market rate of return considering the good positioning in the sector and better financials of the company.

Author:Satish Tayal, MBA (ISBM) is an intern with Kredent Group.

Sanghvi Forging and Engineering Ltd

Posted: 06 May 2011 02:11 AM PDT

Overview- Company and business

Sanghvi Forging and Engineering Ltd is an ISO 9001-2008 certified company. The inception of the company was in 1990. It is a Vadodara based company. SFEL is engaged in manufacturing and marketing of forging product for the non-automotive sector. It manufactures stainless steel forged and Machine Subtends, Forged Flanges, Forged fitting and CNC Machined Forged parts for various industries oil & gas, fertilizers, power etc. The company also exports the products mainly at Europe, Middle East and Canada. The total installed capacity of forged flanges is 3600 MTPA. The company is an approved global vendor of General Electric (GE) and it has obtained an approval of Mazagaon Dock, a GOI enterprise manufacturing submarines and vessels for defence, and Kuwait National Petroleum Corporation.

Industry Analysis

The Indian Forging industry has now emerged as a major contributor to the manufacturing sector of the Indian economy. Forging industry is in the list of the industry type which grows with the GDP of the country and Indian GDP is at growing stage. Forging industry also enjoys the benefits of opportunity of huge exports. The SMEs form the backbone of the industry. The organized sector accounts for about 65-70% of the total forging production in the country. Moreover the industry is already transformed from labour-intensive to capital-intensive.

The Indian Forging industry has been growing at a CAGR of 29%. The capacity of the industry is estimated to be around 1.5 million tonnes. During the year 2007-2008, the overall production of forgings increased to about 1.2 million tonnes. India exports huge forgings. In 2007-2008 exported forgings value was about US$ 472 particularly to USA, Europe and China.

Objective of the issue

The size of the IPO is Rs. 36.90 crore with an issue price of Rs. 80-85 per equity shares through 100% book-building process. There are various objective of the company to raise money. The company is setting up a 15000 MTPA open die forging unit at Vadodara. The total estimated cost of the project is around Rs.120.39 crore including margin money which will be partly financed by this issue.

The total estimated issue expense of the company is 300 Lacs which is 7.05% of the issue size which includes legal fee, advertisement fee, registrar fee to name a few.

Remaining part of the project will be financed by means of term loans and internal loans to the extent of Rs 72 crore and through internal accruals of Rs 5.25 crore. The company has already availed a term loan of Rs. 50 crore from State Bank of India and Rs. 22 crore from Bank of Baroda.

Risk Factor

Weaknesses related to the new projects are highlighted in appraisal report which are mainly high cost estimation and delay in implementation. Currently the implementation is at a preliminary stage. The construction has acquired a leasehold right at Vadodara but the activity is yet to commence. This can increase the capital cost.

As per the financial statement 31 December 2010 the company has contingent liabilities of Rs. 454.86 lacs which may affect the financial condition.

Ipo Grading

The IPO grading of the company is graded by CARE. CARE has assigned a 'CARE IPO GRADE 3' to the company which is average. The grading is assigned on the scale of Grade 5 to Grade 1 where Grade 5 indicate strong fundamentals and Grade 1 indicate weak fundamentals.

Key Financials

			INR(IN LACS)
Particulars	2008	2009	2010

Total Income	2387.8	2952.83	2910.55
Total Expenditure	1852.83	2412.35	2305.47
PBT	396.87	350.75	416.06
PAT	252.35	232.38	274.09

Overall view

It is advisable for the investor to subscribe the issue of Sanghvi Forging and Engineering Ltd. The grading of the company is also average which indicates towards positive fundamentals. The company will begin manufacturing critical products like rotors for turbine, tube sheet for oil and gas, shafts for ship building and heavy engineering, which currently are being imported from Korea, Italy and Japan. There is also opportunity for growth and expansion as it has a huge scope for exporting the product.

Author: Satish Tayal (MBA ISBM) is undergoing his summer interhship at Kredent Group

Books to read before going to B-School

Posted: 04 May 2011 04:48 AM PDT

I have been asked these questions a lot of times. The wordings of the questions may be different but the underlying query is the same.

I am sure you might also have similar questions in your mind as mentioned below –

What books should I read before I go to MBA College? Or,
Suggest me the best books before I go for my MBA? Or,
Good books to read prior to MBA, or,
Interesting books to read to develop reading habits before I go to B-School

Today I thought of writing this post with these questions in mind to help everyone reading FireUp's blog. I believe you need to be a voracious reader to be successful as a manager. I am giving you a list of books which I feel is must read for every MBA aspirant. So here goes the list –

List of Best Books for MBA aspirants

The Ten-Day MBA: A Step-By-Step Guide To Mastering The Skills Taught In America’s Top Business Schools – By Steven A. Silbiger – This book includes the latest topics taught at top business schools across the world, including leadership, corporate ethics and compliance, financial planning, and real estate. The book is written in a very lucid manner and is easy to understand for students from any background.It enables readers to absorb the material, speak the language, and acquire the confidence and experience needed to succeed in the competitive environment of good b-schools like IIMs. - Purchase Online

How to Win Friends and Influence People – By Dale Carnegie – In the human relationships and communication skills world, the best book to read is this. According to wikipedia's list of best selling books, more than 15 million copies have been sold world wide – Purchase Online

How to Win Friend and Influence People for Girls – By Donna Dale Carnegie - Purchase Online

The Fountainhead – By Ayn Rand – Without getting philosophical this book has amazing power of changing the way you look at the world. This is one of the most influential books I have read. You will understand what I mean after reading the complete book - Purchase Online

Rich Dad Poor Dad – By Robert T. Kiyosaki - Purchase Online

The Tipping Point: How Little Things Can Make a Big Difference – By Malcolm Gladwell - Purchase Online

If you are interested in finance, especially investing and want your MBA interview to be directed in that direction you can read the following 2 books –

The Intelligent Investor – By Benjamin Graham - Purchase Online

One Up On Wall Street: How To Use What You Already Know To Make Money In The Market – By Peter Lynch - Purchase Online

In my earlier posts I have also written about the best books for CAT preparation and books for MAT preparation.

For your convenience I have given direct book link of Flipkart.com. They deliver book at your door step without any delivery charges. The best part is cash-on-delivery.

Suggest books from your side by posting a comment below. That will help everyone reading this post.

Author – Vineet Patawari

The Importance of a Financial Education to Young Minds

Posted: 03 May 2011 04:56 AM PDT

It doesn’t come naturally for children, teens and young adults to make smart long-term decisions with their money. After all, when you’re young, instant gratification is the key to candy, video games, fast food and trendy clothing.

Because young people aren’t likely to get a thorough financial education in school while they’re busy learning math, science, literature and languages, it’s important that you instill in them valuable financial life lessons while they’re still living in your home. The practical knowledge you provide your children will definitely be worth your while, unless of course you want your children to be borrowing money from you well into adulthood to make up for their money blunders.

To help you in this endeavor, consider the following tips:

1.) Get your children in the habit of saving their money.
Any time a family member gives your young child money for a holiday or their birthday, require that they save a portion of the money in a junior savings account. If you give your child or teen an allowance, you should make a similar savings requirement. When they grow into a teenager, the habit will stick and they’ll learn that they don’t have to spend every penny they have just because they can. This also sets a good foundation for a saving mentality instead of spending mentality for the rest of their lives.

2.) Teach your teens how to draft a budget before they go off to college.
When your teen moves out from under your roof and into the dorms of a university, he or she will be making major financial decisions for the first time without your help. To get them on the right track early, sit down with them regularly and talk about drafting a budget right off the bat, calculating income from their job and whatever money you send them and calculating expenses for food, room and board, cell phone, gas, vehicle maintenance, car payments and books. Many parents require their children to pay a portion of their college tuition as well, so they learn the value of a higher education.

3.) Teach your children to invest in their future.
The younger your son or daughter starts planning for retirement, the less money he or she will need to stash each month into a retirement account, such as an IRA or Roth IRA, to still see amazing results when he or she draws on this account upon retirement. When your young adult starts working and is old enough to open one (typically at the age of 18), help them open an IRA and talk to them about the importance of contributing to it regularly. Teach them that the small amount that’s going out each month is a small price to pay for financial security down the road.

4.) Talk to your teens about credit cards.
Credit card companies target seniors in high school who will soon turn 18 and be able to open lines of credit for themselves. As a parent, it’s your responsibility to talk to your teen about interest rates and the dangers of keeping an ongoing balance on their credit cards. All too many teenagers go off to college, and instead of maintaining a careful budget, begin to rely on credit cards for instant gratification. Over time, these young adults can accumulate a mountain of debt that is detrimental to their financial future. Teach your teenagers the value of saving and budgeting for the things they want and then paying cash up front. Not only will they learn a solid financial principle, but they will learn there is more satisfaction with your purchases when you are patient enough to wait for them and pay for them in full.

5.) Teach your young adult how to make their money multiply.
While it’s important to talk to your young adults about basic savings accounts and liquid emergency funds, it’s also important to talk with them about vehicles for making their money multiply at a faster rate, such as Certificates of Deposit (CDs), mutual funds and stocks. After all, it will be extremely difficult for them to become financially independent as adults without employing higher-risk investments. A course in share market from a reputed institute which also provides practical experience will be wonderful value addition to youngsters.

6.) Teach your children to save up for big expenses.
Last but not least, it’s important to talk to your teens and young adults about the importance of saving up for certain expenses rather than taking out loans. Explain that due to accumulating interest, you actually end up paying significantly MORE for an item or other expense if you take out a loan, no matter how much faster it helps you pay off the expense. Teach your child that “cash is king” when it comes to making purchases, and they will be well set for financial success for the rest of their lives.

Author Bio:
Donna Reish, a freelancer who blogs about best universities, contributed this guest post. She loves to write education, career, frugal living, finance, health, parenting relating articles. She can be reached via email at: donna.reish13@gmail.com.

Case for a 50 basis points on May 3??

Posted: 01 May 2011 05:51 AM PDT

"Sakhi saiyan to khub hi kamat hai…..mehngai daayan maare jaat hai…." goes a number from a popular bollywood flick and rightly so atleast for RBI.

Since the last 15 months or so…RBI has been trying to battle the rising inflation by raising rates (What are policy rates?) eight times since March last year. However inflation, now it seems, is getting out of RBI's control. Over the last one year, there have been many a concerns over structural bottlenecks in the economy which have been causing inflation. Well this might be true, I am not arguing against that. But even if Government decisively acts against structural cause of inflation, it would be some time before anything (like improving storage warehouses, improving transportation facilities, improving public distribution system etc) can be done and it impacts the mighty inflation.

The onus thus totally has been on RBI to manage or rather control inflation. Governor Dr Subbarao is trying to get atleast his inflation forecast right by constantly revising the inflation expectations upwards in all the subsequent policy reviews rather than taking aggressive steps to curb the price rise. Till now RBI has been taking baby steps by raising 25 bps almost every 45 days. The same has had an impact on inflation but only marginally so.

Inflation going forward

As per the last release, WPI for March' 2011 rose to 8.98%, shying away from the 9% mark. Going ahead, I expect price pressure to see more upside post elections due to long pending diesel price hike. Good monsoon forecast by IMD may cool down the expectations but it would be some time before which the same may actually impact the primary articles price. Going by last year's experience, even good monsoons might not have any impact on the prices.

Compromising growth

Growth, which is a trade off for higher interest rates, has been moderating. Latest GDP showed slight moderation in the last quarter's growth rate. It is still some time before we get the first quarter's growth rate. IIP numbers have also been moderating. Inspite of this moderation, I feel there is still some room for RBI to compromise on growth front. As i said in my last post on the same topic (Monetary Policy January), rates are still way below the highs observed during last growth phase before Lehman Brothers fiasco and another 100 bps on repo would not put the economy in any sort of trouble.

RBI clearly has two choices, either to let inflation chop off a few points from the growth rate or to itself step on the growth temporarily and try to tighten its grip on inflation. At the same time, it seems there has been some lag in the transmission of tight monetary policy to the commercial banks. Deposit rates and credit rates to general public have not been impacted to a large extent. Cheap home loan rates existed till recently. SBI put an end to its teaser loan rates only in the last week upon pressure from RBI.

Expectations and impact on equity markets

Thus in the coming monetary policy announcement on May 3, I would expect Mr Subbarao to come down heavily on inflation by going for a more aggressive 50 bps hike in repo rates and take steps to induce commercial banks to raise deposit and lending rates.

If both these factors are accepted by RBI, markets would be looking for some more downside even after a 135 points fall since April 21. Banking stocks would obviously be worst impacted who would be forced to raise atleast the rates and sacrifice their margins.

Author:Praveen Bajaj

May 19, 2011

Why investors are shifting to online investing?

Why invest online – Advantages of investing in mutual funds online?

How to invest in mutual funds online?

May 17, 2011

May 11, 2011

May 10, 2011

May 7, 2011

The Way forward for gold loan market

The Way forward for MFL

What should you do now??

May 6, 2011

May 4, 2011

List of Best Books for MBA aspirants

May 3, 2011

May 1, 2011

Inflation going forward

Compromising growth

Expectations and impact on equity markets

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