Jawaid Naiyer

Voters as Consumers; and Political Marketing in India

2011-05-13T13:20:00.000-07:00

Assembly elections in five Indian states have been just concluded. Results are not surprising by any means. When the election started I was confused about Tamil Nadu – things were not very clear. Congress and DMK relation was in trouble, everyone was shouting from roof top about corruption. From my personal observation I can surely say that corruption is not (or for that matter, has never been) an issue for Indian voters. People can argue, but the truth is that corruption is the lubricant of our economy.

What happened in West Bengal was expected. I feel there is not much surprise in it. Mamata Banerjee threw out the Communists, who ruled West Bengal for 34 continuous years. I don’t know if Communists are surprised by the results!

So, what happened in West Bengal? Were people just wanted change? Or development and progress were an issue? Or they wanted an end to political violence? On what basis they cast their votes? What were the perceptions and reality? How Mamata communicated her agenda to the voters?

There are too many questions; I have the no data and I am not an expert on the subject matter to answer these questions.

Something that has happened prior to the election forced me to write this article - Sabeer Bhatia, the co-founder of Hotmail was ropeed in by Trinamool to manage online election campaign. According to this news article, published in Times of India on March 13, 2001, Sabeer Bhatia will be managing a 12-member team, which included two IIM graduates.

I have been a student of marketing; and the application of the principles of marketing in politics has always fascinated me. I have closely followed and observed last US election and use of social media by Obama’s campaign manager.

Is Bhatia india’s David Plouffe? Or he was just handling social media for Trinamool?

Sometimes I really wonder if Indian political parties are applying the principles of marketing to politics.

I would really love to discuss this topic with anyone interested; and if you have read Political Marketing by Jennifer Lees-Marshment the discussion will be more interesting!

What is so disruptive about Square?

2011-04-27T12:09:00.000-07:00

Square raised undisclosed amount from Visa, a giant in the credit card industry. TechCrunch reported, “Visa Makes a Strategic Investment In Disruptive Mobile Payments Startup Square”.

In the previous round, Square had raised $27.5M from Sequoia and Khosla Ventures. It charges 2.75% per swipe to the merchants.

Update (01/08/2011): Techcrunch reported on 31^st July that Square is now processing $ 4 million mobile payment per day.

The Dilemma of a Founder who can’t Code

2011-04-21T12:54:00.000-07:00

Writing my previous post, When Startups fail, was no fun. It was sort of introspection without reaching a meaningful conclusion. A painful experience! I wrote this because I can’t code.

There are many founders out there who can’t code. And some of them are running quite successful startups. Some hired great programmers and some got a tech co-founder. But things are not so simple…and most of the times you ends up having none.

So, what should a founder with no experience of coding do? I was thinking, and thinking…and then I came across this interesting article, How to hire a programmer to make your ideas happen. It is an useful article but again…things are no so simple. It is quite difficult to communicate with a developer; most probably he will not understand your vision. And he gives a damn shit about your vision, for him it is just another project; he wants to finish it and move on. The more projects he finishes the more money he makes – at least in the short term.

So what should a founder with no experience of coding do? Should he learn coding? What is more important to him – money or time? Ok, let’s phrase it differently. Do you as a founder have money to hire smart programmer or do you have enough time to learn coding?

Then another question pops up. Can you learn coding? How fast? How well? Will you become a good developer? And what about the market timing of your product / service? Will market wait? Or somebody else will fill the gap?

Things become complicated if you don’t move fast. You spend 1 or 2 years learning coding/finding the right guy, then you realize that it is too late, there are so many people operate in this space now. Dump your idea and move on. {You spent two years, finding a right guy/learning to code, to develop a group buying site; and you are here…April 2011, should you start developing the site now or just dump it!}

This is a difficult situation. There is no easy answer. Moreover, there is no right answer.

Paul Graham in his blog post How to Start a Startup has tried to make a point about the whole process.

“One of the best tricks I learned during our startup was a rule for deciding who to hire. Could you describe the person as an animal? It might be hard to translate that into another language, but I think everyone in the US knows what it means. It means someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive.

What it means specifically depends on the job: a salesperson who just won't take no for an answer; a hacker who will stay up till 4:00 AM rather than go to bed leaving code with a bug in it; a PR person who will cold-call New York Times reporters on their cell phones; a graphic designer who feels physical pain when something is two millimeters out of place.”

“For programmers we had three additional tests. Was the person genuinely smart? If so, could they actually get things done? And finally, since a few good hackers have unbearable personalities, could we stand to have them around?”

There are bunch of other interesting stuff he talks about.

But my problem is different. What if you don’t have the resources to hire “animal-type” programmer? Does your world end here?

Should you try learning coding? Can we learn? And so on…

I came across another very interesting article (the comments/discussions are more interesting though) on the Hacker News, Founders who can't code. It argues that founders should learn coding and develop the prototype themselves. The benefits of founders knowing coding cannot be listed here.

Someone comments, “The problem is the "idea people" who can't execute - definitely. I too meet more of these wanna-be's than true hustlers, but the ability to sell and raise funds is VERY helpful BEFORE you have a product.”

Even if you learn coding you need a co-founder. So, we have two founders. Founder # 1 has the idea, the vision. Knows marketing, can sell and raise fund. Founder # 2 executes the idea by doing actual coding/development.

I also came across an interview of Hiten Shah, the co-founder of CrazyEgg and KISSmetrics. He is a founder who can’t code, and he went through about twenty different products and 7-10 businesses before getting some serious traction. Read his interview here.

Another question, if you are a founder who can’t code and your start-up operates in India, where should you look to find your co-founder. I recommend trying followings:

Tech Co-Founder, is an online dating platform for founders. But you will not find many people located in India (or some other specific geography).
Linkedin Jobs: Why don’t put a job ad on linkedin for co-founder!
Tweet to your network

Watch the movie The Social Network again before doing any of the above.

“Be Evil. Screw people as much as you can. Secretly hate your co-founders. Screw your investors. Manipulate people. When your startup makes it big you'll cough a few millions to make them shut up. Those bastards.”

Your opinion has no value to me!

2010-08-26T03:37:00.000-07:00

Each time I watch Wall Street I learn something new. Gordon Gekko is a character whose omnipresence in financial market is unquestionable; we find him in every financial market, and all the times.

The most quoted dialogue, “Greed is good”, also ranks #57 in the American Film Institute's list of the top 100 movie quotations in American cinema. During the shareholders’ meeting of Tedlar Paper, Gekko says, “The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”

But Gekko also says, “The most valuable commodity I know of is information.” And I think this is the most important point of the movie – the importance of information in the financial market.

Information vs Opinion

Some times ago I wrote about the relevance of Equity Research Reports, “Who needs an Equity Analyst?” The point was that equity research reports are cheep PR activity for brokers and investment banks. Who needs the opinion of an equity analyst, we all need information.

Before we move further, I would like to present here a case which highlights the value of information.

Hindustan Times published a report

titled “State Bank of India moves to merge 5 associate banks”, on 25^th August, 2010. I thought here we get some arbitrage opportunity to make money. A glance at the charts of State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore point to fact that some people already knew this and already had made money. See the charts on the sides and analyze the price behavior during late July and early August.

The point I’m trying to make here is that an “expert” opinion will not help me in making money. Such opinions have no value to anyone at all.

Retail investors as opposed to sophisticated investors, institutional investors and operators have no reliable source of information. They mostly depend on various financial information web sites. The business model of most of these portals is the same – for revenue generation they largely depend on advertisements. Subscription based models have not been successful (I am not aware if someone has tried this). In recent years we have seen a spurt of such internet startups.

Recently came across Stockezy, which claims to be “

India

's 1st Social Investing Community”. I have been closely watching Market Guru (

market, now shut down), Moneycontrol, Myiris and Lantern Research (worldwide market). I loved MarketGuru and Lantern Research is just great. And I feel if someone can launch a portal which includes the features of MarketGuru and Lantern Research, he can make a killing. But one feature which I miss in almost all of the sites is a decent stock screener. Moneycontrol’s stock screener is just lame. If you use Google Finance’s Stock Screener, you will fall in love with it. Unfortunately Google Finance doesn’t provide such screener for Indian market.

Where the value is?

So, where the value is? Why should I use your site? Mostly retail investors use these websites. If I’m using Moneycontrol, I ask this question, why should I shift to Myiris or Stockezy? Many people think live stock data is a value addition, the fact is live data is not a value addition it is a necessity. I met a guy on one of the online forums and he told me that he has launched a service through which he provides live Nifty/Sensex numbers through Gtalk. I told him this service is useless, If I have a demat account with any broker I get free access to pretty good live data and even some basic charting tools too. Even if a broker (like ICICI Direct) doesn’t provide live streaming, his service was useless. If I have internet connection, there are numerous sites which provide such data free of cost including NSE and BSE sites.

So what is the point? Everyone including retail investors/traders wants to make money – and does your site help him make money or loose money. Some of the websites provide absurd services, like Astroprofit. The last thing I personally would like to do is to provide stock recommendations based on astrology (Moneycontrol). There are better ways to loose money.

What about the issue of community opinion? Does a community of retail investors make a better investment decision? Certainly not. There are reasons for my belief:

Retail investors constitute a very small percentage of total market – hence their combined opinion has no value.
It is most likely that a very small percentage of retail investors will use any particular site – hence community opinion on any given website has no value.
Retail investors are generally ill-informed, have no assess to premium (paid) services like Bloomberg Professional or Reuters – Hence such community opinion is just noise.

Moneycontrol is apparently the most popular and they have strong parent company support. But if someone comes up with a model which provides some value-added services to the retail investors, I’m certain of its success.

When Startups fail

2010-06-27T05:15:00.001-07:00

I was away for sometime…busy trying to do something I considered to be meaningful and more fulfilling. But usually things don’t happen as you plan them. In my case, this probably happened because of the lack of “planning” and trusting / over-estimating others’ professional capabilities.

I started an internet business one year back…the idea was good if not great; divided the whole project into various phases, so as to make it easier for implementation. First hired a programmer who took six months and the result was just crap. Spend lots of money on pre-launch marketing, server etc.

There was no question of giving up. So found someone else, who was ready to be my technology partner in exchange of equity stake in the company. But it was also not a very pleasant experience. Since the time we started – after every fifteen days he will give me a new completion date – this is going on since past six months. And in the meanwhile I kept incurring various costs apart from loosing my credibility.

So finally I decided to put this project on hold for a while or may permanently dump it. May be I’m giving up but we have to be realistic enough not to waste lifetime over something probably which we can not achieve.

During this time I came across some very interesting people, read lots of stuffs and finally learnt much.

If you google you will find reasons for startups failures – the numbers of reasons will probably exceed the numbers of failed startups.

You will find articles with varied titles like “Why Do So Many New Businesses Fail?”, “The 18 Mistakes That kill Startups”, “Why start-ups fail” and so on. But even going through all these reasons will not help. May be you will be able to avoid them – but still no one can guarantee success.

From my personal experience, I will try to list some of the mistakes I have done. They may be not different from others.

Never register a company: Yes, don’t register a company till your startup is ready to face the world. Registering a company will just incur costs and even you may have to fulfill certain regulatory requirements like filing tax return, audit etc. The first thing I did after sketching the business model was to register a private limited company. This was probably the worst thing to do. Because you don’t know if you will be able to execute the idea as planned. Execution is rather uncertain and even more uncertain when you have limited resources. The best time to register a company is just before the start of launch – after all the work already done – just launch is remaining. Try to go for proprietorship or LLP but avoid private limited company unless you have too many partners.

Never Trust a programmer: If you are not a programmer and you are forecasting the outcome of your efforts based on the commitments and professional capabilities of a freelancer – just forget it. No programmer will ever say he can’t do something. Even don’t trust the delivery deadlines you fix or he commit. This will never happen.

So, what should you do? You should try to find a programmer who falls in love with your idea. Every freelancer will say it is a very good idea and he is excited to do this project. But he is not. Find someone who buys your idea – and then agree on how to structure it. Best would be a mixture of equity stake and milestone based payment scheme. But if you decide to hire a programmer without a equity stake – best of luck. But must read “How to hire a programmer to make your ideas happen”.

Never Write a Business Plan: Business plan is just irrelevant if you are not planning to raise seed capital. Rather try to workout a business model, read more here “No One Wins In Business Plan Competitions”

Never Associate with People who are Professional Failures: While starting up you will find many people who are looking for a free ride. Never associate with them – they may be your best friends but they are not startup stuff.

Go Fulltime: You can’t pursue a passion part-time…as you can't get a little bit pregnant. So go full-time if you can.

And When It Fails: It is never a good time to call a quit. But if you decide to do so, try to recover some salvage value of your startup. Try selling it on ebay or on secondmarket.

But I will advice never call a quit. I always remember Sanjeev Bikhchandani, who is India's most successful internet entrepreneur. For close to a decade he struggled on the sidelines but never gave up on his Big Idea. In 2006, naukri.com (Info Edge) became the first dotcom to IPO on an Indian stock exchange. Read more about him here.

A post without a title? Nonsense!

2009-05-12T12:39:00.000-07:00

“I pretty much try to stay in a constant state of confusion just because of the expression it leaves on my face.” - Johnny Depp

Since some time I was away from blogging – although I was fully invested and active on Facebook. Now I have decided to stay away from market for a while. This is not because of the fact that I suffered significant loss, not because I was bearish and market hysterically went up, but because I realized that probably there is something else more worthwhile to do.
Previous month’s market movement surprised everyone…the speculation of economic recovery was gaining currency. We are receiving mixed economic data from the US and other countries as well, but still not sure if we are out of wood yet. So I’m still bearish.
In past, I have tried my hands at many things – investing, trading, writing, poetry and politics among others. Just to find out what I want to do with my life, but nothing was able to keep myself engaged. So thought rather I should keep myself free…just wander…just like that for a while.

Purchased lot of new releases from Amazon - felt bored – put them on the shelf…purchased more titles – some yet to be received.
I was wandering…surfing net just to pass time. In old days people use to wander in jungle but nowadays we wander on net. Suddenly realized that Eva Mendes looks beautiful and watched her interview videos on youtube. It was surprising to know that she is suffering from Arachnophobia. Watch her interview video.

One of my friends is getting married, I was somewhat puzzled what to gift her on this occasion – first I thought I will write a poem for her, which she has been requesting since some time. Started but got lost…then I thought what about naming a star on her name. This idea I stole from the movie A Walk to Remember. I googled for the service provided and lol! I came across a bunch of them. I was surprised how so many companies can have right to name the starts. Then I found Robert Roy Britt’s article on this issue and realized that only the International Astronomical Union (IAU) has the right to officially name celestial objects.

I’m still undecided on this…I mean on the idea of gift. I want something unique, something special and something original. But unfortunately not able to find any “wow” idea, certainly not talking about this idea!

Recently I stared working on an internet start-up idea and was following news to see what kinds of internet ventures are getting funded these days. Most of funded start-ups failed to impress upon me. But some of them were absolutely outrageous. Minglebox.com is one of these… they got $7 Million Funding from Sequoia Capital. What is happening guys to networking and social media sites in India? Isn’t this space over-crowded? International players like FB or Twitter is yet to monetize their models…or are they least bothered to make money? Reportedly minglebox.com’s founder Kavita Iyer is married to one of the Sequoia executives…

I was searching for a good book on online marketing / advertising. Found many on Amazon but was not able to decide for which I should go for. I also came across Avinash Kaushik's book on Web Analytics, placed an order, waiting to be delivered. Joined Avinash network on linkedin, asked him to suggest some good book on online marketing. He referred to Seth’s Blog.

One of my friends suggested why I don’t write a book…I asked him what the use is; I don’t have anything interesting to tell the world. He told that it not about telling the world which you know and they don’t know. He suggested it is simple “Write a book, give few chapter free, blog about it, create a fan page on Facebook – become an expert and earn money”.

Recently in a discussion forum on linkedin, I asked group members that I’m planning an online venture and how to go about it; I mean the technology side of the venture. Someone replied me that I sound naïve and I should read Guy Kawasaki’s The Art of Start. I purchased The Art of Start and Reality Check. Both books suck, I was not able to finish them…I wish I had read these reviews- link1, link2

Guy Kawasaki is a genuinely smart guy but his only meaningful contribution, I think, is bringing the concept of evangelism to the high-tech business, when he was with Apple.

Finally ended up buying The Online Advertising Playbook by Joe Plummer et al. yet to receive from Amazon…by the way did you notice that Amazon has increased the shipment duration for international delivery.

Make Me a Trader

2009-01-16T01:01:00.000-08:00

This video was posted by Michael Covel on his facebook; just thought to share it. Other parts of this can be found on youtube link.

In criticism of Modern Financial Theory

2008-11-21T04:30:00.000-08:00

Probably, I’m among the few readers who don’t buy a book, unless he reads a lot of customers’ reviews. I cultivated this habit unless I realised that my shelf is full of unreadable books which I brought either because the title was very catchy or the editorial review was brilliant or some noble laureate has written the forward. For customers’ review I prefer Amazon and blogs; but sometimes it occurs that you will find conflicting customer reviews. Readers start taking sides – some readers say book is brilliant and raises important points; other would say this book is infuriating, the book is written in a smug and obnoxious style. In such situation what will you do? I prefer to read such books.

Black Swan by Nassim Nicholas Taleb, was among such book which is being discussed with contempt and respect equally by various group of readers. But what is Black Swan all about? Mr. Taleb explains himself in the following video:

In 2006, in The Black Swan he writes;

“Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought.”

Another book of his, Fooled by Randomness also gained huge popularity and also attracted equally vociferous critics.

What I understand is that Mr. Taleb has an idea and the idea is that financial market returns don’t follow a normal distribution and also how do we quantify the risk of outliers—meaning, very rare but very important events. He becomes angry while explaining the same:

But similar issues were raised by Benoit Mandelbrot in his book The (Mis)behavior of Markets, he was one of the most vocal critics of the modern finance theory, including CAPM, the Efficient Market Hypothesis, and the Black Scholes model. He points that all these theories rely on the assumptions that market prices are normally distributed. He demonstrated that market prices do not follow a normal distribution, but instead a Cauchy distribution.
Other authors have also written about this; Robert Shiller's "Irrational Exuberance” Roger Lowenstein's "When Genius Failed: The Rise and Fall of Long Term Capital Management" are other few books on this topic

But the question is if independence and normality are not sound assumption, so what? These assumptions help to simplify the math of modern financial theory. Or we have some other way out? Do you see any problem with these assumptions?

Banker Begs On Wall Street

2008-11-20T11:46:00.000-08:00

FamousAndrew Episode 3: Andrew Goes Begging on Wall Street from Famous Andrew on Vimeo.

Who needs an Equity Analyst?

2008-11-07T23:36:00.000-08:00

In recent time we have seen growing criticism of equity analysts among all classes of investors, particularly among retail investors. Mr. Bhavtosh Vajpayee, became best equity analyst by downgrading IT sector last year (what is happening to IT sector now compared to other sectors). Our friend Mr. Arjun Narayana Murti, analyst at Goldman Sachs became a doomsday prophet for forecasting oil prices (where the oil price is heading now?). Were these analysts just lucky or their analysis was worth the attention?
What caught my attention was an equity report by Mr. Akshay Soni of Morgan Stanley India on Suzlon Energy (Reuters: SUZL.BO, Bloomberg: SUEL IN) released on November 3, 2008, in which he changed the Price Target from Rs450.00 to Rs52.45!!! The major reason stated for this drastic change was increasing risk to wind energy business from changing macro particularly massive downtick in oil prices.

When I looked into the historical prices of crude oil and stock price of Suzlon Energy, I found a very weak relation between the two, refer the graph below:

Apparently, this report was updated just to justify the current stock price of Suzlon Energy. But this analyst was not as lucky as Bhavtosh Vajpayee or Arjun Narayana Murti. This report came out on November 3, 2008 and as on today the closing price is Rs70.6, see below the weekly performance of Suzlon Energy after the report:

On November 4, 2008, the news came that Suzlon and Martifer has entered into an agreement in August this year to complete an early purchase of Martifer stake of 22.4 percent in REpower Systems AG in mid December 2008 which was initially due in May 2009. On last Thursday, the company informed BSE that the New Zealand based TrustPower Ltd has started the stage 1 of its first Australian wind farm located at Snowtown 170 km north of Adelaide. The said wind farm comprises of 47 numbers of Suzlon S88 turbines.

Have these news driven the stock up? Were these news not known to the analysts? Two other reasons stated for this cut in the target price were given as:

· Leveraged Balance Sheet and the cancellation of the rights issue.
· Suzlon decision not to try to exercise the domination and profit transfer agreement with REpower, due to opposition from lenders who will be financing the next rounds of growth for REpower.

Mr. Krishnakant Thakur of Edelweiss released a similar report on October 11, 2008 and gave a much reasonable target price of Rs94.0, lets see the major forecast of these two reports:

I have always believed that these reports are written for other purposes, purpose other than that of providing guideline to fund managers and investors. First and foremost purpose is to provide employment to equity analysts.

My understanding is that macroeconomic and political factors play more important role in the stock price movement of a company, for short or even medium term the company fundamentals becomes mostly irrelevant.

Some of fellow bloggers have been forecasting Sensex at below 4,000 level in near future, I don’t know if their prediction will become true or not. But when some of them predicted that Sensex will reach 12,000 level when it was around 20,000 level I criticised them (Link1, Link2).

Keeping I mind the current financial crisis and impeding global recession, I don’t see a quick recovery of the market. May be the US economy will recover within two years and subsequently the stock market. But for Indian stock market, I’m not very hopeful. Ideally Indian stock market should also be recovering along with that of the US; when I compared the Nasdaq composite index and Sensex and found a good correlation between them.

But when I say I’m pessimistic about Indian stock market, I have certain macroeconomic and political reason to believe that Indian stock market will not improve along with that of the US market. But I also think that Indian stock market may not go down much from here. Some of the reasons I see are:

· Earning growth will be really affected in coming years: I feel from next quarter onward, most of the Indian companies will see negative earning growth. Particularly companies operating in real estate, IT, BPO, Banking, Export and probably metal and cement will be most affected.
· Political instability: Coming general election will see rise of small regional / religious political parties taking centre stage. Congress or BJP may emerge as biggest political party but they will not be able to form the government. BSP, SP, Left Parties will gain substantially in the coming general election.
· Political Change in US: The new government in the US may adopt a protectionist approach, which will hurt the Indian IT and BPO industry. Export oriented companies will also affected.

Disclosure: Suzlon Energy, Long Position

Me, my friends and the mess!

2008-10-19T12:25:00.000-07:00

The nightmare is over?

Since sometime I was away from blogging; moreover, I’ve never been a prolific blogger. In recent weeks we all have seen history in making. Nightmare on Wall Street has just subsided; the collapse of Lehman Brothers and weeks of high bail-out drama perhaps reshaped American finance.

Subsequently, stock markets tumbled across the world and the oil price plummeted as well; the dollar fell sharply but rupee’s fall was faster. Obviously; we are living in a wonderful time, we are seeing this all happen and getting a first-hand experience of all this rather than reading in case studies of macro-economics books.

Some of my friends were of opinion that this is the end of the crisis and Asian markets have just started to bottom-out. Some were holding very negative outlook – they believed this will last for years to come and in coming months it will even become more severe and employment outlook will become grim.

Some of my friends were happy that reality prices are falling and now they can afford to buy an apartment of their own. It is widely believed that economic meltdown will hit realty sector hard; Indian reality sector is believed to suffer a lot - Realty sector analysts are of the view that the slowdown will carry a double edge impact to it. One, as banks, financial institutions and IT companies are reducing their headcount, the market will lose some of the possible buyers and secondly, the NRI community will have second thoughts about property purchases here in India not because the market is uncertain but because if they wait they can get a better deal.

Indian stock market was also witnessing bloodbath on Dalal Street, even Prime Minister's Economic Advisory Council (PMEAC) Chairman, Suresh Tendulkar, acknowledged that Global financial crisis following the collapse of US investment bankers Lehman Brothers will adversely impact the portfolio investment in India.

To cut the story short, we have seen a month of historical importance and lots have been written and being written everyday in every newspaper and all over the internet. So for me it is probably useless to stretch this post.

Young and restless!
So what I was doing all this time? In office also there is not much work to be done because of the current market situation (so what I’m doing in office, well, this we will discuss later). I was busy analysing the current market situation and trying to find some value picks. But now I’ve almost fed-up with this value investing style and probably I don’t have patience for this.
I tried my hands at different things – mostly trading – equities, derivatives, currency, commodities and CFDs. I found derivative trading more suited to my personality - mainly CFDs. I learned (?) technical analysis – the inane chart patterns and obscure indicators, the thing which I hated mostly during my MBA days.

I thought I will start CFD trading and searched internet for information, I was surprised to see that there is not much quality information available on the net. I spent so much time to decide the broker – market maker or DMA or STP, and all the other factors like commission, slippage, order execution and spread. Deciding a service provider has never been so difficult.
I consulted one of my friends who was trading CFDs and he told me don’t get into it. He just lost AED 240,000/- in this! I was little bit confused if this product is for me or not, but finally I liked this product and the leverage it provides.

So I decided that I will try to provide some information on this product through my blog, and decided to change my blog title to “Chronicle of an Unknown Trader”.

I find the world of CFDs like the world of pirates – the excitement and the reward – all suits my style. I decided to just get out of this pseudo-academic blogging. I have made certain change to this blog and will keep updating regularly. I have also allowed un-moderated comment again.

Some Thoughts on PE Funds

2008-09-05T13:33:00.000-07:00

Business Standard has an article which says that India-focused PE funds set to raise $5 bn by December. It further says that According to PE industry experts, India-focused funds are expected to raise close to $5 billion in the six months from June to December, more than double in the same period last year. What’s more interesting is that these funds are able to raise amounts ranging from $700 to $1 billion hardly within three months.
I believe that most of these funds are being raised from foreign investors, particularly from US and other European countries, in spite of credit crunch and sub-prime mess. Most of this money is going into real estate and infrastructure projects; technology start-ups are also enjoying a major chunk of these funds.

But the nature of these deals are questionable; there is a video on Moneycontrol which says that some deals are happening what is called as “Preferred Return Deal” where the returns are predefined in most of the cases and the fund can leave the project even before the project is completed (or there is delay). Since PE funds don’t have to disclose anything so we don’t have much literature on the nature of these deals.

The other thing I have notice is the direction of the follow of these funds; fund raised in one country is used for buyouts in other countries. Why these funds don’t see opportunities in their own countries? Or they want to be global for the sake of it.

Reportedly, the MENA private equity market has increased 41 percent since 1998 with investments currently totalling $1 billion. That investment level is expected to more than double to between $2.1 and $2.6 billion with Shariah-compliant investment funds playing a significant part in this phenomenal growth. Whereas Abu Dhabi Sovereign wealth funds have entered British football with The Abu Dhabi United Group, headed by ‘the Donald Trump of Abu Dhabi’, agreeing to buy Manchester City. Dubai International Capital previously tried to purchase a stake in the Tom Hicks-owned Liverpool team.

Recently we have noticed that numerous venture groups / PE firms have grown like mushroom all over the places; similarly we have seen a recent dramatic growth by buyout funds also.

There is a nice ppt by Abraaj which raises some succinct questions:

• Is this a bubble or a profound shift?
• How will the industry evolve in the next decade?

But more important question is the question of value creation; how is the value created in these kinds of deals and transactions? Probably some time later we will discuss this question…

Bankers V/s Consultants

2008-09-03T11:29:00.000-07:00

Damn It Feels Good To Be A Banker -- A Wall Street Musical from Leveraged Sell-Out on Vimeo.

Leveraged sellout and other sites…

2008-08-25T12:03:00.000-07:00

Recently I came across three funny sites on investment banking, leveraged Sellout , WallStreetOasis and mergers and inquisitions. Leveraged sellout was the funniest, and the other two also were very interesting. Mergers and inquisitions (M&I)’s author writes about “Five Ways To Make Your Resume Sink Faster Than The Titanic” and “Holla Back, Office: 7 Reasons You Shouldn’t Work In The Back Office”.

He also offers “Investment Banking Resume Review Services” at 100$ per resume. The anonymous author claims to be investment banking professional who has decided who gets interviewed in recruiting at over 10 schools in US. He has written a review of a book “Damn, It Feels Good To Be A Banker” published by Leveraged Sellout (LS). This site appears to offer insiders’ view of investment banking (IB), apparently valuable and funny.
Wall Street Oasis (WSO) is rather an informative site and merits a through reading, since it is not an atypical site so I will not write beyond.
LS is funniest of all…article titles range from “The Shitshow” to “10-Gay”. People comments with names like “Sr. Excel Monkey”. This author tell you “why you shouldn’t use the mouse in Excel” and other funny things. Reading this site is a great break form mundane daily routine…at least for me. I enjoyed it.

Live to trade another day!

2008-08-23T02:58:00.001-07:00

There is an article in Economic Times which says “Volatility and its unpredictable nature is what distinguish markets from casinos and lottery draw (really?).” This article says how one can make money in the volatile market.
But the question is how much return one should expect? What is a decent return in stock market? Some of my friends trade with short-term perspective and make too much hoopla about any gain/loss they realise. Some time back just before the end of bull market one of my friend purchased three small cap stocks and within few weeks the stock shoot up more that two times. He called me and he was very happy, I told him to book profit but he was reluctant to do so. “I have read very favourable reports”, he told me. With in no time the stocks started falling with no buyers, and finally he was able to sell the stocks 60% less than his purchase price.
I have been very clear in that matter, how much return I want and in how much time. Once I achieve this, irrespective of the trend I sell my holdings. I’m very quick in booking loss as well, if a stock falls below 5% of purchase price I sell them. In this way I’m able to limit my loss and make profit most of the time. A very common euphoria is when we make money we think we are smarter than market, and this make us greedy as well.
Coming back to the original questions how much return should we expect; I will quote here the return from a less risky instrument “Mutual funds” which is obviously less risky than equity. Below are the five top mutual funds all equity type.

Taurus Libra Taxshield - Growth : 31.0235%

Reliance Diversified Power Sector Fund - Growth : 25.0621%

Reliance Regular Savings Fund - Equity - Growth : 22.5651%

JM Healthcare Sector Fund - Growth : 21.8991%

ICICI Prudential Infrastructure Fund - FII Growth : 18.364%

*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for more than 1 year are compounded annualized.
*Source: MutualFundIndia.com

During the last one year the market has been very choppy and it was very difficult to make money in these turbulent times.
In the developed market the return has been much less as compared to the emerging markets. Hedge Funds have been well known to out perform the market. In her book “Hedge Hunters” Katherine Burton writes that the average annual return for a hedge fund between the start of 2000 and July 2007 was less than 9%, a dramatic decline from 18% in the previous decade.
Return may vary depending on sheer luck, timing and market trends but to make money in the market we have to be very clear in our objective. Greed will eventually wash away all the profit and some times even the original invested amount – so live to trade another day!

Another bad news for reality sector

2008-08-09T10:26:00.000-07:00

Global commercial property sales halved: Study9 Aug, 2008, 2208 hrs IST, REUTERS
NEW YORK: World sales of major commercial properties fell 49 per cent to $306 billion in the first six months of 2008 from the same period last year, as sales in developed countries were hit hard by the credit crisis and slowing economies, a report released on Friday said.
Real Capital Analytics said dramatic shifts in the capital flows for commercial property became evident in the first half of 2008 as Tokyo overtook London and New York as the most active sales market and investors began favoring Asian markets.
Sales activity fell sharply in many developed Western economies while Brazil, Russia, India and China, and most other emerging markets posted gains. Emerging markets accounted for 25 per cent of all property sales in the first half of 2008, up from 10 per cent in the same period a year ago, according to the report that tracks transactions worth at least $10 million.
Development sites were the only type of property to see a rise in sales, up 11 per cent and led by a record $2.3 billion paid for Chelsea Barracks in London.
"However, with new developments in Europe being delayed and new regulations limiting land sales in China, this sector may soon experience the same declining investment other property types have," the report said.
Overall office sales were down 60 per cent in the first half of the year versus a year ago, and sales of hotels were off 68 per cent. Sales of shopping centers were down 54 per cent in the first half of 2008. Industrial property, comprised of warehouse and distribution centers, fell 38 per cent. Apartment building sales were off 34 per cent. Of the 84 countries the report tracks, 35 posted higher property sales in the first half of 2008. All but five were emerging economies. Indian sales doubled, Brazil rose 40 per cent, Russia was up 19 per cent, while China's previous robust growth slowed to 7 per cent.
Among developed countries, U.S. sales dropped 63 per cent. UK sales were off 57 per cent and Germany slid 65 per cent.

Source: Economic Times

Commercial rentals slide 30%

2008-08-06T12:27:00.000-07:00

Commercial rentals slide 30%, realty players don't know!
Press Trust Of India / New Delhi August 6, 2008

Rentals in shopping malls have come down by up to 30 per cent in the past couple of months as supply outstrips demand, but realty players doggedly refuse to acknowledge such a trend.

Read more: http://www.business-standard.com/india/storypage.php?tp=on&autono=44185

IS INSURANCE AN INVESTMENT OPTION?

2008-08-03T00:10:00.000-07:00

Certainly not! Insurance is not an investment product and this fact is clearly understood by majority of us. But the problem arises when some financial institution advertises “Unit-linked life insurance offers the interesting option of combining protection and tax advantages of life insurance with the attractive prospects of investing in equities” and their sales guys are trained to sell this product as an “Investment Product”. And this specifically the problem with these ULIPs, when I buy an investment product my objective is entirely different, my expectations are different, and my time horizon is different.

So why does banks need to sell an “Insurance Product” as an “Investment Product”? This is the problem of Indian culture; we Indian don’t feel a need of insurance. The penetration of insurance products is meagre as compared to any developed country or most of the developing countries.

Most of the people realise negetives points of ULIPs only after they opt for it. The funny thing is that the sales guys don’t explain you the various charges, they don’t explain you the Investment Content Rate (ICR).

Now let’s understand what an ULIP is?

What is the Unit Linked Endowment Assurance?

A unit-linked plan works on a minimum premium basis and not on a sum assured one. You decide the amount you can contribute at regular intervals. ULIP offers you insurance cover till your insurance needs are fulfilled, beyond that it becomes an investment avenue.

Hence, unit linked endowment plan is an insurance policy that is designed to pay a lump sum on maturity or on earlier death. The Unit Linked Endowment Plan also gives the option of additional protection against the six common critical illnesses, as well as additional protection if death is as the result of an accident.

Your premiums are invested in units of the investment fund of your choice, based on the prevailing unit price. On maturity you receive the value of your units. On death (or critical illness, if chosen) you receive the greater of the value of your units and your selected basic sum assured.

What are the Premiums?

You agree to pay a level premium regularly, either quarterly, half-yearly or annually, throughout the term of the policy.

What investment funds can I invest in?

The policy is fully unitised with a range of funds to match your needs and approach to risk. Each investment fund is composed of units. All the units in a fund are identical. Most of the ULIP offers the following funds:

Liquid fund
The Liquid fund invests 100% in bank deposits and high quality short-term money market instruments. The fund is designed to be cash secure and has a very low level of risk; however unit prices may occasionally go down due to the use of short-term money market instruments.

Secure Managed
The Secure Managed fund invests 100% in Government Securities and Bonds issued by companies or other bodies with a high credit standing, however a small amount of working capital may be invested in cash to facilitate the day-to-day running of the fund. This fund has a low level of risk but unit prices may still go up or down.

Defensive Managed
15% to 30% of the Defensive Managed fund will be invested in high quality Indian equities. The remainder will be invested in Government Securities and Bonds issued by companies or other bodies with a high credit standing. In addition, a small amount of working capital may be invested in cash to facilitate the day-to-day running of the fund. The fund has a moderate level of risk with the opportunity to earn higher returns in the long term from some equity investment. Unit prices may go up or down.

Balanced Managed
30% to 60% of the Balanced Managed fund will be invested in high quality Indian equities. The remainder will be invested in Government Securities and Bonds issued by companies or other bodies with a high credit standing. In addition a small amount of working capital may be invested in cash to facilitate the day-to-day running of the fund. The fund has a higher level of risk with the opportunity to earn higher returns in the long term from the higher proportion it invests in equities. Unit prices may go up or down.

Growth fund
The Growth fund invests 100% in high quality Indian equities. In addition a small amount of working capital may be invested in cash to facilitate the day-to-day running of the fund. The fund has a higher level of risk with the opportunity to earn higher returns in the long term from the investment in equities. Unit prices may go up or down.

You can switch your existing investments from any endowment unit linked fund to another endowment unit linked fund. You can also give us a premium redirection instruction to redirect future premiums to different endowment unit linked funds.

What are the Benefits?

There are 4 different options available to choose from:

1. Life Option
On death within the policy term, the greater of the Sum Assured and the value of the unit-linked fund will be paid to your nominee. On survival to the end of the policy term the value of the unit linked fund will be paid to you.

2. Life and Health Option
On death or earlier diagnosis of any one of six common critical illnesses within the policy term, the greater of the Sum Assured and the value of the unit-linked fund will be paid to your nominee. On survival to the end of the policy term the value of the unit-linked fund will be paid to you.

3. Extra Life Option
This option pays the same benefits as the Life Option but, should death occur within the policy term as the result of an accident, an extra benefit equal to the Sum Assured will be paid.

4. Extra Life and Health Option
This option pays the same benefits as the Life and Health Option but, should death occur within the policy term as the result of an accident, an extra benefit equal to the Sum Assured will be paid.

What levels of protection are available?

Depending on the age at entry, you may choose between 3 levels of cover – Low, Medium or High. For each level the Sum Assured is based on the amount of premium you pay each year.

Some ULIP doesn’t allow to change the Sum Assured during the term of the contract.
What happens if I surrender the policy?

The policyholder can surrender the policy at any point of time during the contract term. The amount payable will be the unitised fund value after applying additional surrender charges mentioned (mostly not told by the sales person).
When can I access my money?

You can make lump sum withdrawals from you funds provided the fund balance after withdrawal and charges does not fall below the Sum Assured.
What happens if I stop paying premiums?

This product has a grace period of 15 days for the payment of each premium after the initial premium. If you stop paying premiums, before you have paid 3 years of annual premiums, they will cancel your policy and return to you the value of your unitised fund, less cancellation charges.

Does this Plan offer me Tax Benefits?

Premiums paid under this plan are eligible for tax benefits under Section 88 of the Income Tax Act, 1961.

Charges

They will deduct charges from the policy to cover the costs. A percentage of each premium is invested to buy units; this percentage is called the Investment Content Rate.

It varies with different ULIPs but generally the rates are as follows:

Premium paid	Investment Content Rate (ICR)

Regular - Year 1	73%

Regular - Year 2	73%

Regular - Year 3+	99%

Regular Premium Increases	99%

Single Premium Top-Up	99%

The unit price each day will include a fund management charge. This charge is generally 0.80% of the fund value per annum taken on a daily basis. A flat fee of Rs 15 per month will be deducted by cancellation of units on each monthly charge date. This will be proportioned across funds according to the fund holdings at the time of cancellation of units.

Exclusions

No benefit will be paid if the death has occurred directly or indirectly as a result of suicide within one year from the date of first being covered under the policy. They generally don’t pay health benefits if the critical illness has occurred within 6 months of the start of the contract.

They will not pay health benefits if the critical illness is caused directly or indirectly by any of the following:

§ Suicide within one year of the Date of Commencement or the date of issue of the Policy, if later

§ Alcohol or solvent abuse, or the taking of drugs except under the direction of a registered medical practitioner.

§ Taking part or practising for any hazardous hobby, pursuit or race unless previously agreed to by us in writing

§ War, invasion, hostilities (whether war is declared or not), civil war, rebellion, revolution or taking part in a riot or civil commotion.

§ Taking part in any flying activity, other than as a passenger in a commercially licensed aircraft.

§ Taking part in any act of a criminal nature.

Now let’s see how the ULIPs are not a better investment product, suppose I’m investing Rs. 10,000 on quarterly basis starting from 13-Jan-06 (This is a real example, disclosing the ULIP’s name may not be proper). The entire amount paid till 15-April-08 is tabulated below. Total amount paid is Rs. 100,000/- and the total amount invested is Rs. 78,200/- the fund value as on 11-May-08 is Rs. 91,000/- (the fund value has reduced substantially recently due to current market situation). The return on total amount paid is -9% annualised, and the return on amount invested by the fund management company is 16.37% (it may be in negative if I take current market price).

Suppose I have an alternative option to invest in an annuity, where I pay Rs. 10,000/ quarterly and I get certain amount on the same date as that of the ULIP’s. If we take risk free rate of return as 7% and calculate the future value of the amount invested, this mount should have been Rs. 149,400/-

Now after understanding the ULIP lets discuss another issue, many people tend to believe that ULIPs are better investment option than that of Mutual Fund

Are ULIPs better than Mutual Funds?

I have many times come across the argument that the charges in ULIPs are a lot more than MFs. Let’s compare the charges of ULIPs and MF excluding mortality charges since MF's don't offer insurance.

Let us say, we want to invest Rs.60,000 every year in a mutual fund of a leading fund house and also the same amount in ULIPS of HDFC, ICICI and BAJAJ ALLIANZ. The following are the charges:

MFS

Loading charges = 2.25%

Fund Management Charge = 2.50%

HDFC Unit Linked Endowment Plus

Loading charges = 60% first year, 1% from second year

Fund Management Charge = 0.80%

Admin charge = Rs.240 per annum

Loyalty bonus = 0.1% each year

Bajaj Allianz Unit Gain Plus

Loading charges = 24% first year, 3% from second year

Fund Management Charge = 1.75%

Admin charge = Rs.240 per annum

ICICI Lifetime Plus

Loading charges = 25% first year, 25% second year, 3% third and fourth year, 1% from fifth year

Fund Management Charge = 1.75%

Admin charge = Rs.720 per annum

If my investments grew by 10%, the following is what the returns would look like if I consider all the charges.

The returns from HDFC Unit Linked Endowment Plus will beat MF returns by 9TH YEAR

The returns from Bajaj Allianz Unit Gain Plus will beat MF returns by 11TH YEAR

The returns from ICICI Prudential Lifetime Plus will beat MF returns by 12TH YEAR

The conclusion is that we should clearly understand the product we are investing in; our portfolio should be well diversified and we should clearly understand our risk taking ability.

Seven things to remember in bear run

2008-03-21T09:44:00.000-07:00

There is a good article in the Economic Times titled Seven things to remember in bear run – must read for common investors.

The End of Bull Market?

2008-03-20T12:55:00.000-07:00

An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today. - Dr Laurence J. Peter

In my previous post I wrote about the uncertainty prevailing in the equity market. Apparently this volatility and downtrend are not a local event rather they are evident globally. I was reading an interview of Shankar Sharma of First Global and felt comfortable with his opinion that this volatility and downtrend is there to stay in the global equity market. Perhaps other asset classes are more attractive now– may be fixed income securities are of course a better choice and agri-commodities also appears to be rewarding.

But the question is what exactly is happening and what will happen next. I often wonder can we predict economic events – perhaps not, we can just realize as and when they occur.

People blame FIIs outflow for the current volatility in the Indian market, but it the market which makes the flow and not the flow which makes the market. In my previous post I have given few references of empirical studies to substantial this point.

So what is happening at the fundamental level? Truly speaking, India can’t sustain a 9 % growth rate; sadly on policy level we are not doing enough to make the growth sustainable like china. GDP estimates are already falling. Further India can’t insulate its economy and equity market from that of the US.
Indian economy is already showing the symptom of slowing down – lower industrial production (5.3% as compared to Jan-07 11.6%), high inflation and sharp deceleration in capital good market (2.2 %, lowest since April 2002). Moreover, negative growth in the sensitive consumer durable segment. If growth slows, so will tax collection. Growth of 9% now looks more like a cyclical peak than a permanent achievement: bottlenecks throughout the economy mean it cannot go faster without setting off inflation and other issues. If we take the public finances, the government is predicting a budget deficit of 3.1% for the current fiscal year and 2.5% next. But these numbers are artificially low. They omit the states' deficits and also most of the cost of fertiliser and fuel subsidies.
Many economists feel that the best gauge of economic performance is not growth in GDP or other similar indicators, but GDP per person. If we see the GDP per person growth, it tells a completely different story. Some emerging economies also look less impressive when growth is compared on a per-person basis. One of the supposedly booming BRIC countries, Brazil, has seen its GDP per head increase by only 2.3% per year since 2003, barely any faster than Japan's. Russia, by contrast, enjoyed annual average growth in GDP per head of 7.4% because the population is falling faster than in any other large country (by 0.5% a year). As far as India is concerned, we love to boast that our economy's growth rate has almost caught up with China's, but its population is also expanding much faster. Over the past five years, the 10.2% average increase in China's income per head dwarfed India's 6.8% gain.
In many ways India counts as one of liberalisation's greatest success stories. Sadly, this achievement is more fragile than it looks. Many things restrain India's economy. I give the full blame to the bureaucrats and politicians, but it is not unusual for a country's bureaucrats and politicians to be less efficient than its businesspeople. The administrative machine is corroded by apathy and corruption. The government's subsidies fail to reach the poor, its schools fail to teach them and its rural clinics fail to treat them. Administrative reform needs to go deeper. The government's debt burden leaves it short of money for infrastructure. It is reluctant to free banks, pension funds and insurers to serve the market better, because it needs them to buy its bonds. The miserable record of its social spending deprives firms of well-nourished, well-schooled workers, and saps the political will for reform.
The US recession will surely impact India in a big way, and what is happening to US? Economists fear that US is heading to 1929 kind of situation. Bankruptcies in the financial sector affects credit with a cascading effect. Fed’s instruments are not enough. Fed officials are in fact the first to acknowledge that their initiative attacks only one problem, the liquidity problem at big banks. It does nothing about the central risk to the U.S. economy: an unprecedented crash in home values that is putting an enormous strain on the banking system.
How bad will this downturn get? No one can know because we've never experienced such a slide in the housing market. When a sector as huge as housing goes into a deep leap, it's pretty much inevitable that the rest of the economy will be affected.The entire capital of the U.S. banking system would be wiped out many times over if everyone who was underwater on a mortgage turned the keys over to their lenders. Home mortgages account for 44% of private nonfinancial debt, making them one of the main pillars of the debt market. If the value of household real estate falls by 25%—an amount many economists consider plausible—it would be a $5 trillion loss of wealth.

Will the picture change after US election? May be not! In the Presidential race, Republican Senator John McCain doesn't want to bail out either side, favoring private workouts between borrowers and lenders. Here's how he summed up his feelings on Mar.11: "It is not the government's role to bail out investors...or lending institutions who didn't do their job." Democratic Senators Barack Obama and Hillary Clinton both tilt toward homeowners.
The outcome of two events will impact the equity market and economy as a whole – the result of US election and Indian election. Political analysts fear and early election in India. The quarterly results are also about to be declared, which will give further direction to the equity market.

From here to where??

2008-03-13T01:26:00.000-07:00

Analysts (mostly Technical) have given numerous reasons to explain the ongoing turmoil and volatility in the market. Interestingly, when SENSEX touched 21K level all of them narrated the same story – Indian growth story. Now they have all the things to blame – from recession in US to the Budget, from FIIs to week global cues. Apparently they are unable to understand the market.

FIIs have been blamed enough. But the empirical evidence is on the contrary, Choe and others (“Do foreign investors destabilize stock markets” -1998) studied before and after Asian Crisis of 1997 and found no evidence of stock price movement caused by FIIs withdrawal in Korea. However, Tanushree Mazumdar in his work (FII inflows to India: their effect on stock market liquidity and volatility-2004) found that liquidity has increased from the time Indian stock markets were opened to FII inflows. He further concluded that the inflows have not caused much turbulence in the market and the relationship between FII flows and volatility were found to be quite poor. Statistically, there is no evidence that volatility in market is related to FIIs activities. In fact, in the times of market crashes, FIIs were mostly net buyers. During the Asian financial crisis of 1997, FIIs were the net buyers. During the scam and crash of November 2001, when SENSEX hit 3800, FIIs were again the net buyers. In March 2002, when SENSEX touched 3807, FIIs investment was net Rs.2204.8cr. During the Nuclear test of 1998, FII s outgo was mere Rs.557 cr. in May and Rs.896 cr. in June. Historical data suggests that the domestic players were large net sellers in the all the above situations.

Budget were not that bad – apart from the 60,000 crore of the debt waiver - which was obviously a good politics (bad economics?).

Technical analysts are suggesting that SENSEX may touch 12K level. I was reading one such report and the analyst claimed that market discounts everything well in advance. So I tried to guess what market is trying to discount – an early election and a hung assembly. Perhaps!

Liquidity crunch is of course a reason – but obviously you can’t explain the volatility alone by this logic. I believe investors’ perception is the main reason for this volatility. I talked to many of my friends who invest/trade in the market. Most of them believe that market will fall to 12K level. But all of them are planning to put big money in the market at that level. They also hope that by next year June-July the SENSEX will touch 30K level. I also observed a profit booking tendency among all of them. Whenever market touches a new level they buy but sell them even at a small rise. Somewhere they believe that market can’t sustain at a higher level currently – all of them gave the same reason – the recession in the US.

Obviously you can’t predict the market – and you should not. You don’t need to predict the market to be a intelligent investor.

Can you beat the market?

2008-01-20T23:30:00.000-08:00

Some time back I purchased three stocks; today I exited and made 12.29 % average return in 8 days. If I have removed Nicco from my portfolio return would have been straight 26.1 % in just 8 days.

If we have exited Nicco on Jan 15, our average return would have been 26.1 % almost double of current average of 12.29 %

There is some 3000 plus small cap companies, some of are real jewel. But the problem is how to dig in the coal to find the diamonds; it needs a hell of work and analysis.

Correction or rally? History says rally...

http://www.business-standard.com/common/storypage_c_online.php?leftnm=10&bKeyFlag=IN&autono=32716

Are Midcaps and smallcaps loosing charm?

2008-01-13T06:23:00.000-08:00

2007-04-11T12:24:00.000-07:00

Scaling New Heights
Gulf News Report

The design of good houses requires anunderstanding of both the construction materials and the behavior of real humans.
- Peter Morville

When it comes to construction, the UAE leads the way. The UAE's construction industry is valued at $221 billion (about Dh811.73 billion) - the highest in the region. This highlights the fact that planned construction is the focus of the Emirates, particularly Dubai. Large property developers such as Nakheel, Emaar, Dubai Properties and Dubai International Properties have announced projects worth $26 billion (about Dh95.49 billion), while Dubai Municipality, Dewa and the Department of Civil Aviation are planning projects costing another $20 billion (about Dh73.46 billion).

Bernard Walsh, Managing Director, DMG World Media Dubai Limited, says, "The UAE has a young, ever-growing population, leading to massive housing requirements while the oil revenues continue to drive a construction boom in both the public and private sectors. "The ongoing construction boom throughout the Gulf is the result of an extremely active public sector and the commitment of governments to develop and enhance its infrastructure, leading to the commissioning of hospitals, fire stations, tourism and educational facilities.

Annual requirement
"With desalination providing 80 per cent of the annual requirement, the UAE alone will spend in excess of $7 billion (about Dh25.7 billion) over the next 25 years to develop its water resources, with a series of new plants developed throughout the Emirates. "Private sector development is even more ambitious, with the focus throughout the region firmly on hotels, leisure and commercial developments, shopping malls, apartment blocks, residential developments and office towers, as the growth and significance of the tourism trade continues at a rapid pace," says Walsh.

"These projects are, in turn, boosting the business of the entire spectrum of supply industries - a typical example is cement, with Dubai Holdings establishing the Emirates Cement Company (ECC), which aims to profit from the current boom in the region's construction sector. To be located in Fujairah and be operational within two years, it will feature a three-million- tonne-capacity plant and raw material quarries." According to a recent UN conference on Trade and Development, the GCC states attracted $1.8 billion (about Dh6.61 billion) of foreign development investment in 2003; $480 million (about Dh1.7 billion) of this flowed into the UAE. This was believed to increase significantly in 2004 and 2005 due to the opportunities in the region, the relaxation of trade barriers and the improved governance being implemented by the Dubai International Financial Centre (DIFC).

Riad Bsaibes, Chief Operating Officer, Amana Contracting and Steel Buildings, attributes the boom in UAE's construction industry to several factors. "Looking at the macro-economic level, the increase in oil creates an increase in government wealth and expenditure. Besides this, the choice of investments made after 9/11 has been favourable for the UAE, which is considered a safer environment for investments.

"The introduction of freehold property ownership by non-UAE and non-GCC residents has helped the industry grow. The UAE's geographic location makes it a prime candidate for investment. Worthwhile investments in infrastructure in globally recognised products such as Emirates airline brings in more companies to the UAE which in turn increases the demand on the real estate market," says Bsaibes.

He believes the UAE is fertile environment for construction because it is a growing economy. "Since the UAE has a developing economy it is still growing, unlike developed economies which now have to rebuild themselves. In a developing economy where the service and financial industry aren't developed and industry is not very mature, investors look toward real estate as investment vehicles as opposed to other investment opportunities.

"Real estate investment has what economists call a mutiplier effect. Every dollar invested produces more returns. Since construction depends on manpower it feeds its own cycle," says Bsaibes. "The philosophy from the film Field of Dreams says its best: ?Build it and they will come'. It's the same with the UAE," says Avin Gidwani, CEO, Industry Networks, a high-tech information exchange service for the building and construction industry. The company's BNC network (building and construction network) is the UAE's largest and most powerful information service - offering information on more than 10,000 projects and 15,000 companies in the building and construction industry.

"There are two things that set buildings in the UAE apart from construction in most parts of the world. There are no constraints on architectural vision - the artist is encouraged to dream the impossible dream and is thus free to create. Secondly, there is no place in the world where construction moves as fast as the UAE. The exponential timescale is the most impressive feature of the phenomenal development here. "The UAE construction industry desperately needs to ensure that the buildings it builds last by following predefined building standards. The industry still sits on the fence, shuffling between the US and European standards, depending upon the consultants, and this needs to change," cautions Gidwani.

With some of the most innovative projects under way, analysts and top executives associated with mega development projects in the UAE expect the construction and real estate sectors to remain upbeat.

---------------------------------------------------------------------------------------------------------------------------------------
Mammut Building System (MBS) is of the largest manufacturer and supplier of steel buildings in Gulf region. Contact MBS