2_16th April 2008 (160408)

8/6/2019 2_16th April 2008 (160408)

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Quiz

“A bank is a place that will lend you money if you can prove you don't need it.” Bob Hope, Americ

Comedian, Actor.

1. What is a form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both

current and future?2. What is a deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for

money spent on expenses as mortgage interest, state and local taxes, gifts, and medical expenses,throughout the year, known as?

3. What is the category of mortgages with low-documentation or no-documentation mortgages that havebeen abused known as?

4. An event that produces a significant change within an economy, despite occurring outside of it, is unprdictable and typically impacts supply or demand throughout the markets, is known as?

5. A risk management technique that mixes a wide variety of investments within a portfolio, yields higherreturns and poses a lower risk than any individual investment, is known as?

(..Continued from previous issue)

Q) What is your take on FDI regulations in India? (Suggestions, if any.)

Reply- FDI regulation in the country is quite investor friendly. It is the infrastructure and transaction costs thadeter FDI. Also we do not combine foresight and policy. For example I dream of India being the location for abooks publishing activity of the world. This would call for a pro-active FDI policy into book publishing and prining.

Q) Where do you see India vis-à-vis the other countries you have researched like Malaysia, Philipines, Indonesia, Vietnam, Sri Lanka, etc.? (Any parameters of comparison)

R- Our strength is our people and our freedom. Our horrible weakness is our lack of discipline. Many smallernations have the discipline that is delivering results. Also we talk and promise more than deliverable.

Q) What measures of financial inclusion do you think are feasible in India especially in rural andsemi urban areas?

R- Micro finance to groups is a good option. The scary part is loan waivers.

Q) Under the present scenario of rising Inflation, what do you suggest the government to have atrade off between interest rate & inflation, keeping in view the fed rate cuts & expected recessioin US?

R- In a highly globalizing economy, inflation control takes place via currency appreciation, skill developmentand wage/salary competitiveness. Interest rates will become increasingly difficult to manipulate. Leaving priceto markets, increasing supplies to lower costs and prices etc are the best for the longer term.

Q) What advice would you give MBA Finance students? What should their level of preparednessbe when they enter the actual business environment?

R- Every student must know that she or he is paid for specific skills that only she or he could supply. What is that I have to add special and specific value? If one can answer the question with confidence, there is no limto growth.

Interview With Prof Bhanoji Rao

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Did you Know?

During The Middle Ametal was expenand seldom usedhouseho ld waDishes and pots

made of economclay called pygg housewives kept savings in pygg which they called bank or piggy bank.

Over the next hundred to thundred years, peforgot that "pr e f e r r e d t o earthenware mateand the piggy came to be assocwith the animal

instead.

ASHOK LEYLAN

BSE- 500477, NSE ASHOKLEY,

CMP- Rs. 37.75

TARGET PRICE: R

BHEL,BSE- 50010

NSE- BHEL

CMP- Rs. 1,829.95

TARGET PRICE: RS

SINTEX INDUSTRBSE- 500376, NSE

SATYAMCOMP

CMP- Rs. 414.25

TARGET PRICE: Rs

Stock Ratnas

“Lack of money is the root of all evil” George Barnard Shaw

P

Answers To Quiz

1. Liability DrivenInvestment – L

2. ItemizedDeduction

3. Liar Loans

4. Economic Shoc

5. Diversification

7 KEY RATIOS FOR PICKING STOCKS

(..continued from previous issue)

Compiled by:

Nikhil Purohit

4. Price earnings ratio (P/E)

Price/Earnings Ratio (P/E) = Price of the share / Earnings per share

This ratio indicates the extent to which earnings of a share are covered by its price. If P/E is 5, itmeans that the price of a share is 5 times its earnings. In other words, the company's EPS re-maining constant, it will take you approximately five years through dividends plus capital appre-ciation to recover the cost of buying the share. The lower the P/E, lesser the time it will take foryou to recover your investment. P/E ratio is a reflection of the market's opinion of the earningscapacity and future business prospects of a company. Companies which enjoy the confidence of

investors and have a higher market standing usually command high P/E ratios.

5. Dividend and yield

There are many investors who buy shares with the objective of earning a regular income from

their investment. Their primary concern is with the amount that a company gives as dividends --capital appreciation being only a secondary consideration. For such investors, dividends obviously

play a crucial role in their investment calculations. It is illogical to draw a distinction between capi-tal appreciation and dividends. Money is money -- it doesn't really matter whether it comes fromcapital appreciation or from dividends. A wise investor is primarily concerned with the total re-turns on his investment -- he doesn't really care whether these returns come from capital appre-ciation or dividends, or through varying combinations of both. In fact, investors in high tax brack-ets prefer to get most of their returns through long-term capital appreciation because of tax con-siderations. Companies that give high dividends not only have a poor growth record but often alsopoor future growth prospects. If a company distributes the bulk of its earnings in the form of divi-dends, there will not be enough ploughback for financing future growth. On the other hand, highgrowth companies generally have a poor dividend record. This is because such companies useonly a relatively small proportion of their earnings to pay dividends. In the long run, however,high growth companies not only offer steep capital appreciation but also end up paying higher

dividends. In short, it all boils down to whether you are prepared to sacrifice a part of your imme-

diate dividend income in the expectation of greater capital appreciation and higher dividends inthe years to come and the whole issue is basically a trade-off between capital appreciation and

income.

Investors are not really interested in dividends but in the relationship that dividends bear to the

market price of the company's shares. This relationship is expressed by the ratio called yield ordividend yield:

Yield = (Dividend per share / market price per share) x 100

6. Return on Capital Employed (ROCE)

Return on capital employed (ROCE) is best defined as operating profit divided by capital employed(net worth plus debt). The figure for operating profit is arrived at after adding back taxes paid,depreciation, extraordinary one-time expenses, and deducting extraordinary one-time income andother income (income not earned through mainline operations), to the net profit figure. ROCEthus reflects the overall earnings performance and operational efficiency of a company's business.

It is an important basic ratio that permits an investor to make inter-company comparisons.

7. PEG ratio

PEG is an important and widely used ratio for forming an estimate of the intrinsic value of ashare. It tells you whether the share that you are interested in buying or selling is under-priced,fully priced or over-priced. This is based on the assumption that the higher the expected growthrate of the company, the higher will be the P/E ratio that the company's share commands in themarket.

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INVESTOR’S CHECK Kotak Mahindra 30 Unit Scheme-Growth (Kotak 30-G).

The investment objective of the scheme is to generate capital appreciation from a portfolio of predominantly equity and

equity related securities. Investors with low appetite for risk can consider taking exposure to Kotak 30. The fund’s return

over the last one year has reiterated its ability to sail through difficult phases. While this fund may not be the best option

for performance chasers, consistent returns over the last few years as well as the stability showcased during volatile mar

kets such as the present one provides a good case for investment. Holdings of the fund includes investing in companies

such as RELIANCE INDUSTRIES, L&T, HDFC, BHEL, INFOSYS etc.

Suitability : Kotak 30’s large-cap focus may offer a relatively safer exposure to investors wanting to enter the equity

market now

Performance : Kotak 30’s one-year return of 38 per cent over the last one year has comfortably beaten its benchmark —S&P CNX Nifty’s return of 29 per cent. Over a five-year period, the fund returned 50 per cent, beating its benchmark by aclear 13 percentage points. It, however, lagged its peer, HDFC 200, over this period.

Please mail your valuable feedbacks, reviews at [email protected]

Buzz Word

• Killer bees

Often used in risk arbitrage. Those who aid a company infending off a takeover bid, usually investment bankers whodevise strategies to make the target less attractive or more

difficult to acquire.

• EDGAR The Securities & Exchange Commission uses Electronic Data

Gathering and Retrieval to transmit company documentssuch as 10-Ks, 10-Qs, quarterly reports, and other SEC fil-ings, to investors.

• Debt displacement The amount of borrowing that leasing displaces. Firms thatdo a lot of leasing will be forced to cut back on borrowing.

Book Quotes:

Why We Want You to be Rich is not a how book that will actually teach you how to rich, but a book that tells you why should rich. It's a book that puts forward a list of cosequences that will inevitably come aboutyou choose not to pursue financial securitand counteracts these consequences with bunch of motivational talk that will send yoon your way to great riches.

-Why you want to be rich.

Tag Lines:

HIGHER STANDARDS – BANK OF AMERICA

YOUR CITI NEVER SLEEPS; BECAUSE THE CITI NEVER

SLEEPS; CITI. LIVE RICHLY; THE WHOLE WORLD IN

ONE BANK; WHERE MONEY LIVES - CITIBANK

THINK SMALL – AKAI

THE POWER TO BE YOUR BEST - APPLE COMPUTERS

WHAT’S IN YOUR WALLET? - CAPITAL ONE

WE MOVE THE WORLD / COMPETITION. BAD FOR

THEM. GREAT FOR YOU – DHL

IT’S TIME FOR CLARITY - KPMG

A. Axiom B. Austin Silversmith C. Grapevine

D. Legal Funding Solutions

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Contributions made by :

Logos, Taglines & Editing Arihant PatawariFouzia Taranum B

News Anup Rajan & Ashish Poddar

Did you know, Quotes SukruthaStock Ratnas, Quiz Lavanya

Graphs Gnana DeviInvestor’s Check Diwakar GroverInterview Sasmit K. SahuBook Quotes, Buzz Word Nikhil Mehta Article Nikhil PurohitCoordination Manish Sinha

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2_16th April 2008 (160408)