Journal of FInance Vol 13

1. CHEERS TO THE NEW YEAR!
The year 2007 has been the year of booming markets, strategic global acquisitions, strong corporate
earnings, appreciating currency and robust macro indicators, to name just a few. The march continues.
And will flow down in 2008 as well. While the economy seems to be firing on all cylinders, there’s a fear
that the highs of 2007 could result in major challenges in the coming year.
The year 2007 will go down as an important milestone in India’s history. It saw the economy charting a
gravity – defying growth curve – with India joining the trillion- dollar economy club, rupee appreciating
solidly against the dollar, stockmarkets scaling newer highs above the 20,000-mark, industrial output
steadily climbing, India Inc making strategic acquisitions on foreign shores and posting strong earnings
and a distinct rise in personal incomes and employment opportunities.
From stocks and MFs to property and gold – the markets didn’t disappoint Indian investors in 2007. And
now with a euphoric year behind them, investors’ expectations for 2008, is obviously nothing short of
Great. The unanimous view of experts is that stocks would remain the flavour of the times, though they
cautioned investors to take informed decisions. As far as the mutual fund segment, a better variety of
products, transparency in pricing and a sound retail model would help expand reach and spreads of the
industry. And the real estate as an asset class had evolved big time and it has the potential to going up.
However, experts don’t see any action happening on the commodities trade front. At a time when the
whole world is bullish on the commodity market, India has failed to set up a common market to join the
euphoria. Experts understood the need to make the market a vibrant part of the economy.
Trends that will shape the world
Blue will replace green due to environmental movements; Aging populations will increasingly outsmart
chronic disease as generic testing and other medical break through become widely available. And reality
checks will kick in as the American tech bubble and Chinese economic bubble continue to stretch. These
are among the trends for the near future as forecast in the report released by JWT, the largest advertising
agency in the US. The key trends highlighted in the report trends for 2008 include:
Blue is the new Green

Climate change has quickly become the driver of environmentalism 2.0, and people worldwide understand
that climate is all about the seas and the sky both blue. Watch for green to become a subset of blue, which is
coming to denote the much larger emerging spirit of good-citizen ethics.
Radical transparency
It’s the new generation gap, a divide between those who relish privacy and those who want to show and tell
all. For younger generations, nothing to hide will be the new norm. But look for radical transparency to
temper (at least temporary) as online exhibitionists enter higher education and the workforce.
Cooperative consumption
Fractional ownership is moving beyond the shared planes of the jet-setting elite. The masses are already
sharing everything from art to cars to designer handbags, and as technology for pooling demand and
resources becomes increasingly sophisticated, this model will be applied to wider range of categories.
Macro Monitor
Growth Momentum
The GDP growth rate may still remain at around 9% in 2008. The growth in agriculture will hold the key
for achieving a double-digit growth in 2008 and beyond. In 2006-07, the Indian economy continued its
forward march, with the overall growth in real gross domestic product at factor cost estimated at 9.4%.
India was the second highest contributor to world growth in 2006 (in Purchasing Power Parity weighted
terms). Sustained high growth over the last four years has made India the third largest economy after USA
and China (measured in PPP terms), with its share in world GDP rising from 5.5% in 2002 to 6.4% in ‘06.
Power
The power sector will remain extremely bullish in 2008. There has been an improvement in the growth in
power generation over the last few years. The growth during 2006-07 and April-September, 2007 was
7.3% and 7.6%, respectively. In rural electrification, by the end of August 2007, 81.6% of the villages are
reported to have been electrified.
Aviation
The domestic airline market is getting progressively more competitive, leading to a phenomenal growth.
The trend is likely to continue in 2008 too. The passengers handled at domestic terminals increased by
26.5% in the first half of 2007-08 on top of 40.2% increase in the first half of 2006-07. At the same time,
passengers handled at international terminals maintained growth of over 12%. April-September, 2007,
also witnessed a considerable growth in import cargo handled at major airports and sea ports.
Railways
The profitability graph of the Indian Railways is likely to continue northward in 2008. Data on earnings
of railways has shown a double-digit growth – both in the passenger (12.5%) and freight (10.4%)
segments during April-September 2007. While the share of passenger earnings accounted for 29.2%,
freight earnings constituted 66.8% of the total earnings during April-September, 2007.
Roads
In the road sector, 2008 looks promising and growth may come from rural segments. The National
Highway Development Programme (NHPD), is being implemented in four phases at present. The present
phases I, II & IIIA envisage improving more than 25,785 km of arterial routes of National Highway
network to international standards. The four laning the 5,846 km long Golden Quadrilateral (GQ)
connecting Delhi, Mumbai, Chennai and Kolkata is nearing completion.
Telecommunications
The sector will ring louder in 2008, particularly after the entry of new players into the segment. The gross
number of telephone by September 2007 increased to 249 million compared to 241 million in August
2007. The overall tele-density reached 21.9% in September 2007. In the wireless segment, there was an
addition of 7.8 million subscribers in September 2007 taking the subscriber base to 209 million. During
April-September 2007, 42.8 million total telephone subscribers were added as compared to 29.7 million
during the corresponding period in the previous year. Total broadband subscriber base reached 2.7 million
by the end of September 2007.
Core Inputs: Six industries which have a bearing on infrastructure comprising electricity, coal, steel, crude
petroleum, refinery throughput and cement, having a weight of 26.7% in index of industrial production
registered a growth of 6.6% (provisional) as against 8.7% during April-September 2006-07. Barring
refinery throughput, none of the other industries kept pace with the overall industrial growth. It could be a
concern in 2008 if other allied factors fail to rescue these key segments.
2. SECURITY MARKET
Year 2007
The year ‘07 has been yet another blockbuster year for the stock markets. The Sensex posted annual
returns of 46.6 per cent as on last Friday on December 28 this year, following gains of 46.7 per cent in
2006. While the year 2006 was focused on the large-caps, specifically the Sensex scrips, the broader
indices have performed better in 2007.
The BSE 100 and BSE 200 rose by nearly 59 per cent and BSE 500 gained over 61 per cent. But among
the diversified indices, the BSE Small cap has gone up the most, rising by 87 per cent. The BSE Midcap
has gained 65 per cent. In 2006, both these indices had underperformed the Sensex and even the BSE 100
and even the BSE 100, 200 and 500 indices.
Among the sectoral indices, the BSE Metal index has gained 12o per cent during the year, thanks to the
steel pack, with Tata Steel, Sail and Jindal Steel emerging as multi-baggers. The capital goods index has
been the second best performer, giving the return of 116 per cent, as both L&T and Bhel were big
winners. The oil and gas index comes next at 113.6 per cent, because heavyweight Reliance Industries
more than doubled. The BSE IT index was the only loser among the sectoral indices, as it shed 13.7 per
cent in the year thanks to the depreciating dollar. The auto index gained 1.4 per cent due to the slow sales
growth posted by two-wheelers and commercial vehicles. Healthcare too has been in defensive mode,
gaining by just 14.4 per cent.
Just another milestone: sensex at 20k
December 2007: The benchmark indices Sensex and Nifty closed past 20K and 6K levels respectively for
the first time ever, and scaled new peaks during the month. The small and mid-cap indices too, touched
new closing peaks on sustained investment buying. The US Federal Reserve’s decision to lower interest
rates by 25 basis points helped the market sentiment to some extent. The robust growth in IIP to 11.8 % in
October ’07 from 4.5 % a year ago also helped the Sensex end in positive terrain.
31/08/07 (Friday) – 15,318.60

28/09/07 (Friday) – 17,291.10 > monthly gains: 1973.20
Adopt a long-term strategy
The bulls are roaring and the Sensex has taken a giant leap in the last one year. It has crossed many a
milestone this year to be in the striking distance of reaching the eligible age to marry. So what should you
expect from the stock market in the year 2008? According to P N Vijay, CEO, P N Vijay Financial
Services, the bull-run at the stock market has been one long party. “We’ve had different runs, the Harshad
Mehta run, Ketan Parekh run; Reliance induced run and the IT bull market. But this time, the market is
strong on fundamentals.” But as an investor what does this mean for you? “It simply means that stock
market is not a casino, if you stay invested for a long-term, then it’s the best of the bets.”
Outlook sunny, but subprime fears loom on markets
(Dr. Mark Mobius MD, Templeton Asset Management)
2007 has been another positive year for emerging markets equities. Despite concerns regarding the
subprime crisis in the US, most stock markets were supported by a robust macroeconomic environment,
surging money supply, rising commodity prices, stronger emerging market currencies, improved
corporate earnings and significant fund flows.
Despite the overall robust market performances seen in 2007, the later half of the year was plagued with
increased volatility. Investors remained nervous due to widespread concerns over the impact on the global
economy of the credit crisis in the US. This uncertainty is expected to continue in the near term or at least
until the full extent of the subprime becomes clear.
Thus far, the subprime issue in the US has had limited impact on emerging markets. However, the impact
on financial corporations, which have a direct exposure to subprime mortgages, has been significant
requiring massive injections of capital for some institutions banks like Citicorp. One concern for
emerging markets is the likely impact of slower US consumer spending on their exports if the US
economy slows dramatically. As such, volatility is expected to continue in the short term.
Within this environment, emerging markets still look attractive because they offer superior growth
opportunities at historically lower risk levels due to factors such as but not limited to:
• The privatisation and deregulation of key industries,

• Implementation of appropriate fiscal and monetary policies,
• Stable political environments,
• Improving corporate governance,
• The enhancement of competitiveness through removal of subsidies and reduction of trade barriers,
• Higher productivity because of a younger and better trained labour force,
• As well as a huge consumer base.
Current risks however include but not limited to:
• A major slowdown in the US economy,

• The development of any unfavorable political events,
• Rising inflation,
• Overheating concerns in China and India,
• As well as highly volatile exchange rates and commodity prices.
Despite their rapid growth, a number of emerging market companies are undervalued when compared to
their peers in developed markets. Moreover, as a result of growth in stock markets, liquidity has also
improved significantly. In terms of individual markets, we can find value stocks in most markets since
many markets will have at least some undervalued stocks.
Asia is the largest emerging markets region in the world and home to some of the fastest growing
economies globally. One of the key supporting factors for investing in Asia is its robust economic growth.
Emerging Asia is expected to grow 8.8% in 2008, four times more than the developed markets’ 2.2%
forecast. In addition to the strong economic growth, per capita incomes have been rising and reforms
continue, thus improving the region’s business and investment environment. And in line with that
economic growth, earning growth is expected to be much stronger than that in the developed world. The
region is also home to two of the fastest growing major economies in the world – China and India.
All four Bric economies are registering good GDP growth rate with China, and possibly India, recording
double-digit growth rate. Falling interest rates in Brazil and Russia should continue to fuel economic
activities in these markets. Inflation, while a concern in India and China, remain under control. All four
countries continue to build up vast foreign exchange reserves. Domestic consumption is also becoming an
increasingly important factor.
While we remain positive on the markets’ long-term uptrend, there is no way to predict market movements in
the short-term. Moreover, it is impossible to predict how long bull market will last. No one can predict the
market direction and a bear or bull market can start or end at any time. However, the good news is that bear
markets are shorter in duration than bull markets and bear markets go down a smaller percentage than bull
market increases.
Watch out for the street signs
Dalal Street has proved the doomsayers wrong over the past few years. Experts predict: “It may not be
same in next year”. “The days of easy money may be over”. “Be prepared for lower returns”. The same
forecast was on offer at the end of 2003, 2004, 2005 and 2006. But the market has been improving on the
performance every successive year. Nearly 80% of the stocks on BSE delivered positive returns since the
start of the calendar of ’07. Which means even though returns in some of these stocks may have been
lower than bank deposit rates, investors would not have suffered an erosion of capital.
But if many brokers were to be believed, these statistics would be of cold comfort to many retail investors.
The sharp dips in March and late July’07, with each correction followed by a dramatic rise, caught many
investors on the wrong foot and they ended up surrendering a large part of their earlier gains after having
sold out in panic. Also, the sudden shift of focus from frontline shares to midcap and vice-versa a few times
during the year took many by surprise. Considering that even some of the savvier operators and fund
managers were left scratching their heads in bewilderment on occasions, one can only imagine the turmoil
that many retail investors would have faced.
Whatever the ‘recoupling’ and ‘decoupling’ theories doing the rounds, market gurus maintain the days of
easy money are past, and that investors will have to sweat it out for returns in 2008. Only that investors
wanting to pour their money directly into stocks will have to do a bit more of homework, if they are
seeking bumper returns.
Is this as good as it called?
1. This stock is a good buy. Disclosures to the exchange reveal the promoters have been recently buying
the shares in the secondary market. This means the stock is undervalued. Realty: Promoters buying own
shares often reflect their confidence in the business. But also check the credentials of promoters. Many
hold shares of their company in benami accounts. So it could be case of transfer of shares from the
benami accounts to official accounts.
2. I think I should subscribe to this IPO. Valuations appear expensive, and the company’s track record is
not impressive. But QIB portion has been fully subscribed. Realty: In some smaller issues, FIIs are fronts
for promoters or entities set up by merchant bankers. Even in mid-sized issues, some fund managers are
said to be paid appearance fees. The managers place bids – which help boost subscription figures – but
have an arrangement with merchant bankers that they will not be allotted shares or will be allowed to
withdraw bids.
3. I have a report from my broker, which tells me this stock is a good short-term buy. Realty: Check the
price target and also see where you figure in the priority list of your broker. Plus, the broker would have
tipped off his privileged clients before handing over that report to his economy-class clients.
Big boys rule game despite Sebi’s efforts
2007 has been a good year for retail investors who held on to their investments (either greedy for more
returns or lack of will to book losses) long enough. Returns in many equity schemes of mutual funds have
been handsome, if not comparable to the multi-baggers stocks. The eye-popping gains as a result of the
broad-based rally in second-line shares has left many investors with a feeling that perhaps even legendary
investor Warren Buffet could learn trick or two from them.
Needless to say, it has also been a good year for the Big Boys of the game, who have been busy skimming
off the cream. This elite crowd includes some fund managers with a few thousand crore of assets under
management, bulge bracket individual investors, savvy market operators and even promoters. Sebi
continued with its efforts to provide a level playing field for all classes of investors by raising disclosure
levels and stepping up surveillance measures. As expected, the Big Boys too have been improvising on
their techniques.
Norms for share allotment in IPOs have been tightened. But gray market operators, often hand-in-glove
with the lead managers, have managed to partly find a way around the rules. These players zero in on
individuals with PAN and demat accounts that are willing to rent these out for a fee. Gray market
operators when apply for retail quota through these investors, with an arrangement that the shares once
allotted would be transferred to gray market player’s account on the day of listing. The dummy investors
get as much as Rs 3000-4500 per application of Rs 1 lakh worth of shares.
Sebi has managed to pin down a couple of notorious market operators, known to ramp up stock prices in
collusion with the company management. But these operators have managed to avoid the regulatory glare
and continue their activities. The tactic they have come up with is to use a chain of relatively unknown
broking firms to jack up the stock price. These fringe players are given an assurance by the kingpin that
they will be adequately compensated for the penalty or period of suspension they may have to undergo
should they be nailed by the regulator.
The installation of Integrated Market Surveillance System (IMSS) by Sebi during the latter half of 2007
has made life tougher for manipulators, given the software’s capability to throw up real-time alerts in the
event of any abnormal price moves. But that is not deterring the hardened crooks from trying their luck.
“Manipulators often route the transactions through a large number of entities controlled by them. It is a
long drawn process to establish that all these clients are part of the same group and have been in touch
with each other.
Promoters have not been far behind when it comes to making a quick buck. In one high-profile case, the
promoter group dumped shares on unsuspecting small investors while abiding by the insider trading
disclosure rule in letter. While shares prices of midcap companies have been soaring to record levels. It
was common knowledge that quite a few promoters were fuelling the rally using their unaccounted money
stashed abroad. These funds were routed into the country through the participatory notes. This has been
checked to some extent following the restrictions on the use of participatory notes. Retail investors would
do well to keep these factors in mind as they look to replicate the heady success in this year 2008.
2.1 INDIA
A trillion dollar opportunity
Motilal Oswal Wealth Creation Study (2002-07) report has a discussion on how India, which is now a
one trillion dollar economy, is headed towards becoming a two trillion dollar economy in the 5 five years
and the factors that will take India there and the picture that it paints of the next trillion dollar era…
The Indian economy is on a bull run and has achieved a landmark GDP of US 1 trillion. After witnessing
a lull in the initial years of the current decade, India staged a come back with a huge bang. Over the last 5
years, India’s GDP more than doubled to US 1 trillion, at a CAGR of 16%. A higher GDP growth rate
combined with a lower population growth rate has led to an accelerated growth in per capita GDP.
The economy today is strong and vibrant owing to the progressive liberalisation of government policies;
an increase in foreign direct investment; increased global competitiveness; investment in infrastructure
and the growth in domestic as well as international demand for Indian goods and services. India ranks
fourth in terms of Purchasing Power Parity, after the USA, China and Japan. India is home to the
youngest population in the world – where half its citizens are under the age of 25. This growing working
population in India is providing ‘firepower’ to the growth of our economy.
The Next-Trillion-Dollar (NTD) Era… 2007 to 2012

According to report, released in December 2007, in the next five years India’s GDP will hit US $ 2 trillion
(assuming the current Re/US $ parity). The growth rate in the NTD era will be almost the same as that of
the last 5 years. However, given the high base, the GDP added in the next 5 years will be more than that
which was added in the last 30 years, and twice that of the last 5 years. The report talks of the 3 types
exponentialities in the NTD ERA:
1) The Macroeconomic exponentialities:

a) Consumption: Rising affluence levels will result in sustained growth for luxuries like car, air
conditioners and travel.
b) Government expenditure: A quantum improvement in government finances; first time ever zero
revenue deficits for the Centre.
c) Private Capex: Mega thrust on infrastructure – accentuating India’s capex-led growth story.
d) External Sector: Forex capital flows, which are consistently higher than the current account deficit –
helping to keep interest rates benign.
2) Exponential growth in key industries: Engineering and Construction, Financial Services, Wireless
Telecom, Cars, Cement and Steel
3) Exponentiality in corporate profits
With all the capex plans, India is taking the much-needed firm step forward to sustain its GDP growth.
Rising private sector participation in the Indian economy and easy access to capital (both domestic and
foreign) are the two key drivers of exponentiality in India’s corporate sector sales and profits. The report
expects corporate profits as a % of GDP to rise from 5 per cent in 2007 to 7.8 per cent in the NTD era.
Conclusion
What the report conveys is that the Indian Wealth pie is going to get bigger, and get bigger really fast. So,
now is the top opportune time for investors to stake their claims by investing in India’s growth through
the stock market. And here is three cheers to the much awaited Next Trillion Dollar era!
2.2 INDIA INC
Aspiring for global leadership
The diffidence of Indian companies in the ‘80s gave way to reasonable confidence in the ‘90s. Now,
there’s a lot of positivism as they go global. It would not be a surprise if soon companies in the other
countries start saying, “We wish our company gets acquired by an Indian company. In a number of recent
deals, it has already been proven right.
The worldview in the corporate sector globally is changing. They see India beyond just IT and Indians as
good people managers who respect merit and are smart with technology as well. There is an
acknowledgement of Indian talent. The condescending attitude is changing to that of an equal level, if not
outright respect. And a pack of Indian firms with global acquisitions have to take credit for this
transformation.
Much like the Japanese wave in seventies and the Koreans a decade later, India Inc has launched a wave
of attacks on global markets that have made people sit up and take notice. Even though the Chinese may
disagree, some like liquor baron Vijay Mallya prefer to call it this the Indian decade.
Indian companies have always had opportunities for serious global acquisitions, but government
regulations were a handicap. Things have changed now because forex is not a problem, rules and
permissions do not come in the way. What you see now is just the beginning, you will see much more.
India Inc can finally do what we want to do. It’s a game that’s only just begun.
Just how many Indian companies finally emerge, as world-beaters are hard to predict. But that hasn’t
stopped them from aspiring global leadership. The Indian Inc has a different set of advantages:
They have an ability to relate to others in a changing world. They remained private, unlike say China and
Russia, where, when the time came to open up the economy their Governments were the big players.
Besides, Indian businesses have been compelled to find knowledge often under difficult circumstances and
with limited resources. Since we didn’t have large resources, we had companies that learnt to be smart
even though they were small. Scale hasn’t been limitation for them. They partnered with firms globally,
because they understood that scale is an outcome of being competitive in some sense (and not the other
way round).
Staying below the radar had its advantage. But now, Indian MNCs have to learn to operate under the
harsh glare of global competition, where every move is now closely tracked. That’s not all. The world
may well be a lot more open – but the costs of going global are rising –
One, cost of resources, such as oil, are at an all-time high. Two, increasing environmental concerns could
substantially increase the cost of doing business for companies from emerging markets. Three, reducing
the gap in technology with established rivals from the western markets is tough. Over the next few years,
we have to learn how to transpose our low cost model in other markets with equal effectiveness.
In all the talk about globalisation, Indian MNCs have to remember that the large organic growth will lies
in emerging markets. The key question: how do you translate the benefits from advanced technology,
improved brands and the higher marketshare, to these emerging regions? For India Inc, it’s a question that
will throw up answers in the next five years.
2.3 US ECONOMY
Difficult but not depressing
There are two opinions about what may be happening in the US economy, and by extension to the rest of
the developed world and then to the emerging economies of the world. There is widespread consensus
that the US economy will slow in 2008. The difference is about by how much? In both 2004 and 2005, the
world’s largest economy had been running a bit ahead of the long-term trend value of 3%, though it had
scaled back to 2.9% in 2006. The idea that growth would be slower still in 2007 had preceded (or had
quietly subsumed) the outbreak of the subprime crisis in August 2007.
Since August 2007, the world’s financial markets and US and European lenders have taken a beating as
the subprime mortgage asset and the Collateralised Debt Obligations (CDO) structures imprudently built
on weak ground started to give way. This compounded the uncertainty about the extent of the adverse
economic implications for the US economy and the rest of the world in 2008.
First, the difficulties of banks and other intermediaries, as also the increase in risk pricing, suggested that
credit delivery would slow and in any case happen be at higher interest rates, suggesting that US
consumer spending would slow more than expected.
Second, the decline in home prices (through the wealth effect) was set to further compress consumer
expenditure. Why Europe should follow suit was much unclear, except the premise that given the
surprisingly large exposures to US subprime assets by many European banks, a generalised outbreak of
credit flu would sweep the Euro-zone. However, there is no homegrown problem in either the mortgage
or consumer lending markets in Europe. The only place in Europe that there is a problem is in the UK.
The extreme view is that the US is headed for a recession in 2008, defined as two successive quarters of
negative growth. It is likelihood of “near recessionary” conditions emerging in the US economy in 2008.
That is, conditions where growth would be close to, or even below 1% rather than the recent 3% growth
trend. It must be noted that most big banks maintain growth forecasts of 1.5%. The other viewpoint is that
while US growth will slip, it will not do so by much. In fact, except for the home-building sector, all other
sectors are doing well.
The Euro-zone has had a revival of strong growth since 2006. In the third quarter of 2007 the region grew
by 2.8%, with none of the major economies of the region showing signs of weakness. From all of this the
only conclusion that emerges is that while 2008 will be a slower year, it will not be depressing. However
that has implications for inflation.
Recessionary conditions in the developed world would have compressed export demand of emerging
economies, creating possible slumps in the prices of some manufactured commodities, which price signals
passed through to home markets, would have squeezed operating margins and acted as potential
disincentives for investment. That these things will not come to pass in 2008 is good news. However, the
flip side is that the demand for crude oil, industrial raw materials and grain will not fall.
The main lesson of the past is that the world can live with $ 80-90 per barrel oil. Between November 2005
and 2007, wheat prices doubled and though more acreage is coming under the crop, it is unlikely that
augmented output will soften wheat prices much in 2008-09. India is both an importer of oil and of wheat.
Managing the inflationary burden of high oil and food prices will be the big challenge through 2008-09.
2.4 THE YEAR OF LIVING DANGEROUSLY
Capturing predominant trend of times with only asset classes on fire in emerging markets
Even before 2007, emerging market stocks were on their longest out-performance streak in recorded
history. But the run has been particularly stark over the past year as stock prices in the developing world
weathered not only the turbulence in the US financial system like never before but emerged as clear
market leaders directing global trends. In fact, the emerging market boom is the main factor that has kept
the US equity market in positive territory.
The industrials, metals and energy sectors, which mainly key off demand in China and other developing
economies, posted double-digit gains in 2007 while all companies catering to US domestic demand
performed rather poorly – financials and retailing stocks, for instance, declined more than 10%.
The performance in the marketplace was merely reflective of the new economic reality: emerging markets
accounted for nearly half of global growth in 2007 (in current dollar terms) compared to a 16% contribution
by the US. In the late ‘90s, the attribution for global growth was exactly the inverse.
However, just as confidence was beginning to build in the decoupling regime where emerging markets
could kick away the US ball-and-chain, fresh doubts surfaced towards the end if the year ’07 about the
sustainability of this new world orders. The probability of a US recession increased and emerging market
central banks, led by China, seemed to shift their focus from letting growth rip to curbing inflation.
The outlook for 2008 is now rather uncertain. Clichés such as: ‘The best of the gains are behind us’ and
‘Ignore the US at your own peril’ are back in play.
Heading into the New Year many investors stand paralysed, unsure of how to position themselves. There
is remarkable uniformity in views but no real sense of direction. Ruchir Sharma, the Head of Emerging
Markets Equity, Morgan Stanley argue, “It is worth figuring out what the prevailing consensus views are
what can possibly go wrong.” After all it’s the nature of markets to systematically weed out stale views.
Here’s the list of the 10 most widely held beliefs in the marketplace;
And also what may shake them:
1. US growth will slow sharply in 2008 and the probability of a recession is at least 50%:
An early end to the weakness in the US housing market would greatly surprise the market. A stabilisation
of the housing cycle will help the US consumer soldier on and keep spending in positive territory for the
17th year in a row.
Given how many businesses are currently preparing for a recession, higher-than-expected, US consumer
spending will necessitate a major pick-up in production and lift US GDP growth above 2% in 2008 with
strong export growth contributing at least another 1% to economic output.
It’s interesting to note that many heavy-hitters, from Larry Summers to Martin Feldstein, are terribly
bearish about US growth prospects. Typically, economists have a poor track record in calling recessions
and that itself should increase the chance of a positive surprise.
2. Japan and Europe will remain ‘coupled’ with the US:
With US and emerging markets accounting for nearly 80% of the global growth this decade, analysts have
stopped expecting anything from the other two major economic blocs. If domestic demand in either Japan
or Europe picks up independently of the US, it would change many deeply entrenched views regarding
the economic vitality of those two regions.
3. Emerging markets can decouple from the US only to a limited extent but certainly not during a US
recession:
Despite all the decoupling evidence of the past year, conviction in such a regime runs skin deep. Just a
repetition of this year during which emerging markets charted their own course even in the face of
decelerating US growth, will again be a surprise.
4. US short-term interest rates are bound to fall significantly:
The market expects the US Federal Reserve to cut short-term rates by at least 100-basis points in 2008.
An unexpected revival in US growth prospects will dramatically change the outlook for interest rates
across the yield curve and spark a major sell-off in the bond markets.
5. Inflation is largely a food-and-energy-related problem worldwide and is unlikely to spillover:
Economists are using the template of the 1980s and ‘90s, when any rise in food and energy prices was
transitory and didn’t feed through to core inflation, to evaluate price behaviour in the current context as
well. A broadening of inflationary pressures would upset such an assessment and lead to fears of a 1970s,
when inflation was a structural supply-side problem that led to stagflation.
6. Stocks face a challenging year due to deteriorating earnings growth:
A melt-up in emerging markets stocks due to increased faith in the decoupling regime or a black-hole
outcome for the US economy in case of a deep recession offers a binominal outlook for global stocks.
During the more mature phase of a bull market, volatility increases with big positive and negative returns.
It should be no different in 2008.
7. Large-cap stocks will do better than small cap stocks, as the latter are more sensitive to business cycle
fluctuations:
Large-cap stocks are enjoying a revival of sorts over the last few quarters and given their relatively more
stable growth profile, analysts expect the trend to continue. It’s hard to imagine what can trigger small-
cap out-performance until a new economy cycle begins but a rally in small-cap stocks due to stronger
global growth will stun investors.
8. The Chinese stock market is a bubble and it’s best to avoid that market:
Even though the domestic market is up nearly 100% in ‘07 due to the strong earnings growth of Chinese
companies; a large number of skeptics who feel a stock bubble would be truly shocked if the market goes
even more vertical in 2008; which it could if the food-inflation scare fades away and earnings growth
keeps surpassing perennially low expectations.
9. The Asian currency bloc will influence the dollar’s weakening more than the European currencies:
Many currency analysts are calling for a dollar bottom against the euro and very recent rise in the dollar
against the European currency has provided those dollar bulls much hope. If the dollar resumes its
downward trend against the euro rather than yen, many currency observers will be taken aback indeed.
10. Democrats regain the White House:
The assumption in political circle is that whoever wins the Democratic presidential nomination will walk
straight into the White House. However, there are significant negatives attached to leading Democratic
Party candidates Hillary Clinton and Barack Obama, leaving room for the Republican nominee to
eventually sneak in. Both Clinton and Obama may find it tough to extend their appeal to beyond half the
electorate.
What comes through these consensus views is that investors are mostly in the ‘muddle through’ camp and
are not geared for any dramatic outcomes in 2008. Yet, the history of markets argues against such years.
More volatile performance is the norm, particularly during the mature phase of a bull market. The year ahead
could indeed see binary outcomes. Global stocks will tear away if the US economic situation just stabilises
quickly and developing economies contribute to boom.
On the flip side, a broad-based pick up in emerging market inflation or a black-hole scenario for the US
economy will sends stocks careening down. The odds still favour the more benign scenario, especially given
the prevailing negative sentiments that’s otherwise highly unusual for a bull market heading into its sixth
year. But it will be a year of living dangerously as the line between a bullish and a bearish regime has rarely
been thinner with stress levels rising on both the inflation and growth fronts.
3 MUTUAL FUND
Choose a good fund
Investment via SIP is the only way to iron out market volatilities, said Krishnamurthy Vijayan, CEO JP
Morgan Asset Management. He said “Indian economy is growing at around 15% (nominal GDP growth)
and fund managers should try to create a portfolio that delivers at least 5% over the nominal GDP Growth
rate on an annualised basis over the long period. What are the best ways to choose a good fund? Says Mr
Vijayan: “First, look at sustainability of the business model, (which is equivalent to betting on an
individual or an organisation). I therefore look for strong systems and processes. Second, look for funds
that have shown consistency in their portfolio (that is investment philosophy).”
Investing in Thematic funds
It’s the fifth year in a row and that’s scary, said Dhirendra Kumar, CEO and founder, Value Research (a
MF tracker). There are lot of thematic and sector funds that are doing the rounds in the form of NFOs.
Are they actually for retail investors? “All thematic funds have a supporting role to play and at any point
of time, should not form more than 15% of one’s overall portfolio. He recommends investing in thematic
funds only if the investor personally believes in that story. He cautions that sector funds are only for those
with special understanding of the sector under consideration and who could manage to opportunistically
time the entry and exit of the fund. “Thematic funds should not be confused with sector funds which
invest in a single sector and do not have the flexibility to move from sector to sector.”
Best equity funds
Mr Kumar recommends eight equity funds – Birla Equity, DSP Equity, Franklin Prima Plus, HDFC
Growth, Kotak 30, SBI Magnum Contra, Reliance Vision and DWS Alpha Equity. Among the ELSS
schemes (tax saving), Birla Equity, HDFC Tax Saver, SBI Magnum Tax Gain, Principal Tax Saving,
Sundaram BNP Tax Saver are the ones to watch out for. These funds are chosen for their consistency of
performance and above average returns. They are either four star or five star funds, indicating top rating
for mutual fund scheme.
Get a PAN card first
Union finance ministry has told Amfi, that every investment made into a fund will compulsorily have to
be accompanied by a valid PAN card from January 1, 2008. Earlier, even proof of having applied for a
PAN card was sufficient for investing in mutual funds. Amfi members are also not pleased. They believe
the government should create a level-playing field among various participants in the financial system.
Why only the mutual fund industry should be singled out when it is anyways in the lowest risk category.
Considering that funds accept and pay money only through banks, there is a clear audit trail. And there is
no question of unaccounted money coming in.
New Year Gift: Entry load scrapped on open-ended mutual fund schemes
It’s raining goodies on the mutual fund industry, within days of issuing guidelines for real estate
investment trusts and indicating a willingness to increase the total overseas investment limit by $ 2
billion, the Sebi has decided to scrap the entry load on open-ended mutual funds schemes. Sometimes
ago, the market regulator had reduced the fee structure for open-ended schemes. Sebi chairman M
Damodaran said: “Mutual fund scheme is a good entry-level vehicle for first time investors. We are
constantly trying to find ways of making investment in MF schemes more friendly and attractive.”
3.1 COMMODITY MAKET
2008 – The year of soft commodities
If you are dabbling in the commodity market, watch out for crude oil, copper, silver and spices, says
Sudip Bandyopadhyay, CEO of Reliance Money. They could surprise investors in 2008. Strictly speaking,
retail investors, unlike in equity or debt markets, can’t today take long-term exposure in the commodity
market. While there are three-month futures available for certain commodities, there is also an absence of
a spot market. While Bandyopadhyay underscored the need to build a market for retail investors, he felt it
was an opportune time to do so. “Historically, bull-runs are 13-17 years in commodity markets and we are
just 8 years into this cycle.
Agri or base metals
He predicts the coming year to be of soft commodities and believes agri commodities could give more
opportunities to make money. Base metal has given a CAGR of 35% in last 3 years, outperforming any
other commodity. However, future projections are more bullish on agri commodities. Base metal is purely
derivatives market, which is volatile. Whereas in agri commodities driven by local physical market; it
gives an opportunity for cash to future arbitrage, which is less risky than pure derivatives position. With
big price increases in almost all the spices in 2007, there is a likelihood that farmers may shift to spices
for the production year of 2008 and hence have significant supply if supported well by weather.
Crude oil
Crude oil prices are anticipated to surge in the first half of ’08, despite the talks of production increase
from OPEC. A look into the supply-demand dispersion in the energy market indicates why the most
promising supply figure from OPEC, indicating a jump of 1.8mbpd production increase, is just sufficient
to bring in a surplus of only 1.1mbpd. However, historically OPEC has consistently underperformed its
call on production.
Precious metals
It may be time to hold on to the yellow metal. The view for gold is essentially bullish for 2008 backed by
the fundamentals, which keep the US dollar weak over a major part of 2008. Mine supply is not expected
to significant improve in case of gold. The official sector sales also seem to be a weakening supply factor,
given the real economic crisis faced by most gold-housing countries like the US, UK and Germany. Then,
there are chances of forex holdings diversification away from the dollar to bullion, which could also add
to the demand and improve the bullish factor of gold. Unlike other commodities, gold is one commodity
in which retail investors could take long-term positions by buying gold exchange-traded funds. Not only it
is the cheapest form of buying gold (as compared to coins and bullion), it also does away with the need to
hoard gold in physical form. Silver mine supply is expected to improve in 2008, thereby causing an
additional surplus to the tune of about 1,000 MT, which would keep the prices under pressure.
Base metals
The fundamental outlook is reasonably sound for base metals. Despite the current turmoil, the US will
avoid recession and global economic growth will still be near 5-7% in 2008. This, together with the
destocking/re-stocking effect, suggests that LME metals demand growth could even pick up in 2008. The
supply side should limit the downside for copper and aluminium, whereas it points to further hefty lossed
for zinc and over the longer term nickel.
4. FINANCIAL INCLUSION: GATEWAY TO 9% GROWTH
1. Financial advisors:
Bank a/c for poor is gateway to 9% growth
How can the national goal of 9% pa plus growth be translated into reality for the 250 million living below
the poverty line and another 500 million who are barely above it? People have to work and make a living
either through self-employment or wage-employment. Wage-employment opportunities have gone up
with the National Rural Employment Guarantee Act (NREGA) programme, and an upsurge of urban
construction and services. Self-employment requires access to credit.
Both wage-employed and self-employed persons need access to credit and many financial services, which
are best enabled through a bank account. Payment of wages workers employed NREGA works can be
done with speed, reliability, low transaction costs and leakages, if each worker has a bank account in
which wages are transferred periodically. A ‘no-frill’ account in which NREGA wages and payments like
maternity and old age support are credited periodically, become the gateway for financial inclusion.
BASIX Chairman Vijay Mahajan said, “A poor landless woman like Asha Devi in Serukahi village of
Muzzafarpur district, Bihar can draw cash, not only from Axis Bank branch 30kms away, but through
much more accessible, mobile staff of BASIX, a microfinance institution (MFI), appointed by Axis Bank
as a “business correspondent” under RBI guidelines.
Slowly, Asha Devi builds confidence in the system and starts to leave some amount behind in the account,
and builds a saving deposit, which grows to Rs 4,400. When her husband is ill, she can draw Rs 1,000 and
she does not need to get a loan from the moneylender at 60% pa interest.
As BASIX sees Asha Devi’s transaction record over a period in its computerized MIS, it offers her a
micro-credit loan of Rs 6,000, with which Asha Devi buys a cow yielding two-and-a-half liters of milk a
day. Under IRDA’s micro-insurance guidelines, BASIX has tied up with insurance companies to cover
the lives of its lakhs of borrowers like Asha Devi, and to provide health cover for critical illnesses
requiring hospitalisation and to insure livestock like Asha Devi’s cow.
Asha Devi’s husband, working as a factory hand in Shahadra, Delhi, has also been helped by BASIX to
open a bank account there and is now able to remit Rs 500 to her every month. It is done using a
technology package developed by a company called A Little World, so that using mobile phones and
smart cards she can get money within half an hour of husband sending it from Delhi. In a year’s time
Asha Devi plans to buy a buffalo yielding 5 liters per day. Her starting individual income of about Rs
9,000 per year goes up to Rs 11,200 due to NREGA, and further to about Rs 13,000 due to the cow. This
will further rise to about Rs 16,600 next year when she gets the buffalo. That is a 22% compounded
annual growth rate in two years.
It is only when income of people likes Asha Devi growing at above 20% pa that we can get equitable 9%
pa growth. And financial inclusion is a necessary condition for equitable growth, though not sufficient by
itself. The gateway to financial inclusion for the poor is a bank account through the business
correspondent model. The use of mobile phone and IT is also necessary to enable remote transactions.
Thus, to increase income and reduce vulnerability of its poor, not only does India have to commit capital
but also offer a high level of regulatory, technological and organisational support.
There is an interesting side-benefit of financial inclusion – it promotes stability of the financial system.
For example, when the Asian currency crisis hit Indonesia in 1997, most of its banks suffered a huge
erosion of deposits, and were hit by a high number of loans being defaulted. But one bank not only
survived, it thrived in this crisis – the Unit Desa (rural division) of Bank Rakyat Indonesia saw an
upsurge in deposits as well as a slight increase in its 98% plus repayment rate. This is because the people
in the rural economy were largely dealing among themselves, so the effect of currency depreciation and
inflation did not affect them much.
2. Wealth managers
Financial inclusion offer huge opportunity to the financial institutions
At first glance, India’s financial sector is doing extremely well. Banks have doubled their loan assets in
four years and the price-to-book value of Indian banks is second only to China. But the irony is that
despite so much growth and wealth creation, two-thirds of the country continues to have no access to
organised financial services.
According to a report by the Boston Consultancy Group (BCG), India has the second biggest number of
financially-excluded households in the world of about 135 million, which is second only to China. India’s
financial sector is growing very rapidly – it is the fastest-growing incremental revenue pool in the world,
growing at a rate faster than even china.
The building blocks for improving financial inclusions are already in place. It is for the players now to
grab the moment. “Including even half of these excluded households provides an opportunity to bring in
some 60 million households into mainstream. The positive economic, not to mention social impact of this
is huge. Since much of this will be in the retail segment which is a local business, it is robust to external
shocks,” says, Mr J Sinha, senior partner and MD, BCG India.
3. Microfinance professionals
Developing alternative credit delivery models
There has been some progress towards financial inclusion with microfinance institutions (MFIs)
becoming active in rural pockets and private and foreign banks lending in the urban subprime sector. But
there have been setbacks as well. Private and foreign banks have pulled out of the subprime segment after
facing flak for deploying recovery agents. Besides, microfinance institutions are facing increased
regulatory scrutiny and a possible cap on interest rates.
National Bank for Agriculture and Rural Development (Nabard) has set a target to disbursing Rs 40 crore
from its Micro Finance Development and Equity Fund scheme in 2007-08 for developing micro and small
enterprises (MSEs). Since the fund disbursement under the scheme has not picked up as per expectations,
the bank has decided to accelerate the programme by capacity enhancement of micro finance institutes
(MFIs), self-help group (SHGs) and non-government organisations (NGOs), which have been enlisted by
Nabard to implement the micro finance programme.
In keeping with the objective of experimenting with alternative credit delivery models for MSEs, Nabard
has constituted MFDEF to step up fund disbursement under the micro finance programme. As per the
charter of the bank, the money from MFDEF is being spent mainly for capacity building of its approved
MFIs, SHGs, NGOs, and training institutes, which have been assigned to play the role of catalysts in
arranging micro finance to MSEs from banks.
4. Tech savvy professionals
Take first step to ensure efficient and reliable system
There are enough indicators to show that the financial sector can take a big leap forward in the next two
years in terms of financial inclusion. Two developments have made this possible. One is the penetration
of mobile telephony. The BCG report highlights the fact that many of the next billion potential customers
are unlikely to have a relationship with a financial services provider but many already be tied to a telecom
provider. ICICI Bank, which pioneered ATM culture in semi-urban India, believes that the next big
opportunity lies in the villages. The bank feels that the channel for growth would be the mobile phone,
which is gaining faster acceptance than any ‘no-frill’ account.
Secondly, the technology gap is closing too. Even as the cost of mobile handsets is coming down, service
providers are working at developing java-based applications, which will provide a simple yet
comprehensive interface for banking transactions on ordinary handsets. At the back-end too, technology is
falling into place. In 2008, most large public sector banks will have migrated from branch banking to a
core banking platform. All account information in a central database will allow the bank to plug into any
distribution channel for banking transactions.
The Mangalore-based Corporation Bank, for instance, is working on a mobile e-purse, which will allow
account holders to make payments to merchants through their mobile phones. The bank is in the process
of tying up with 2,000 merchant establishments for a pilot project. “With the entry of aggregators, we do
not have to tie up with individual telecom companies as they provide access to all providers”, says B
Sambamurthy, chairman, Corporation Bank.
5. Continuing learning centres

Identifying a low-cost loan
Cynics may point out that India has a long way to go in terms of general literacy, leave alone financial
literacy. But they underestimate the Indian ingenuity in dealing with numbers. Gaurang Shah, MD, Kotak
Mahindra Life, reminisces of the days when he led an auto-finance business: “We have had all kinds of
people coming to us for auto loans. There were uneducated people without any knowledge of interest
rates, but they would compare two loan schemes by simply adding up the total fees and installments to be
paid out under one scheme and comparing it with the total payout under another scheme.” And they never
erred in identifying the low-cost loan.
6. Issues of the present

Financial inclusion is necessary for equitable growth
The central bank has come out with a diktat asking banks to open ‘no-frills’ accounts with minimum or
zero balance. As a result, there is move to build a business providing financial services to those who are at
present financially excluded. However, most private banks have introduced such ‘no-frills’ accounts only
to fulfill statutory requirement and have made no effort to publicise the availability of such a product.
The last decade’s record growth in financial services has widened the gap between urban and rural India.
Since 1999, bank deposits have grown 3.75 times to Rs 29.29 trillion, but it is the cities where bank
deposits have been piling up. The change in ideological profile of Indian banks, post-liberalisation, has
also diluted the focus of state-owned banks on rural credit. After losing their ‘creamy layer’ to private
banks, state-owned banks have also begun to structure themselves in the form of new private banks.
5. TAX UPDATES
1 Last date of filing return extended to Feb 29
The government is extending the due date of filing income-tax return to February 29, 2008. The Centre on
Friday (14/12/07) informed the Supreme Court that the due date for filing of income-tax return was being
extended in view of the confusion regarding filing of returns on prescribed new forms ITR-1 to ITR-8 or
old Saral 2D forms. The due date is being extended for all categories of assessees in the country who were
allowed to file returns in form no 2D (Saral) and also for other assessees who may have filed returns in
the old forms on or after May 14, 2007, it said.
The government decision comes in backdrop of the confusion following a CBDT notification issued on
May 14 for the assessment year 2007-08 substituting the old return forms by eight new returns under
series of ITR-1 to ITR-8. As a natural corollary, the returns were required to be filed on the prescribed
forms for the current assessment year.
However, in pursuance of the interim orders of the Allahbad high court (Lucknow Bench), Rajasthan high
court (Jodhpur Bench) and Guwahati high court, the assessee were allowed to exercise the option of
filling of returns in form No 2D (Saral) or any other old forms also. Apart from UP, Rajasthan and
Assam, in some states also, the assessee may have filed returns in Saral 2D or any other old forms as well
under the mistaken impression that they were permitted to do so.
2 CBDT reopens 400 PE & M&A deals
The spillover effect of Vodafone’s battle with Indian tax authorities may prove costly for several other
dealmakers. The Central Board of Direct Taxes (CBDT) has reopened about 400 cases of big and mid-
sized transactions that took place during the past six to seven years. The tax department had earlier
slapped a notice on Vodafone Essar, demanding capital gains tax over its acquisition of a majority stake
in Hutchison Essar, India’s fourth largest mobile telephone company. The case is now locked in the
Bombay High Court.
According to the sources close to the development, the case include foreign corporates and PE firms
selling stakes of companies based in India and not paying any capital gains tax. One of the first such case
that the tax department is currently probing is Montreal-based Alcan Inc’s selling of the controlling stake
in Indian Aluminium Company (Indal) to Hindalco Industries seven years ago. According to sources,
significantly, there were around 300PE deals clocked in India in 2006 alone.
CBDT chairman R Prasad confirmed that department had reopened many more cases similar to that of
Vodafone. Mr Prasad said “We have found that there are many cases when foreign companies or PE firms
sell their stake of an Indian company. Many large transactions do take place in India, but we receive no
tax at all. We have reopened all such cases that took place in the last six or seven years.”
Finance ministry sources say that the revenue department would not like to single out Vodafone, when
there have been many large and mid-sized transactions in the country, involving foreign companies,
where the tax department received no capital gains tax. KPMG’s executive director Vikram Utamsingh,
specialising on M&A deals argues that companies doing transactions through tax havens like Mauritius
should escape such a scrutiny. “In most cases, a foreign company invests in India through a Mauritius-
based holding company. The seller does not sell the share of the Indian company, but those of the parent
entity based in Mauritius. You can’t ask for taxes then,” he says.
3 Unpredictable tax rulings risk to business
Unpredictable rulings by tax authorities pose the toughest tax risk challenge to corporates in the country,
according to survey on Tax Risks in India conducted by PricewaterhouseCoopers (PwC). Among various
taxes, income tax issues remained on top of corporate agenda because of its direct impact on the
bottomline of a company. PwC ED Ketan Dalal said the country’s need to restructure tax administration
and improve dispute resolution mechanism, in the absence of which litigations take on an average 12-15
years to settle. Interestingly, only 16% of the firms surveyed were ready to litigate for settlement in case
of tax dispute.
4 Service charges and tips are not wages: SC
The Supreme Court ruled that tips or service charge paid by customers to the hotel staff did not amount to
“wages” and could not be taken into account for payment of premium to the Employees’ State Insurance
(ESI) Corporation by the industrial establishment.
The ESI Corporation contended that the three-star hotel compulsorily collected 10 per cent of the total bill
amount as service charges and included it in the bills. The service charges so collected are distributed
among employees every quarter. The hotel had total control over the distribution of the amount and this
was distinguishable from “tips”. It was in any event covered by the expression “additional
reimbursement”. The Supreme Court, however, ruled that the amounts received by employees were not in
the nature of “wages”, as they were not given to the employees under the terms of the contract of
employment. The appointment letters expressly stated that employees were not entitled to any other
remuneration. Thus, the distribution of service charges was expressly excluded from the wages.
5 Taxhounds to sniff out evaders with STT
Securities Transaction Tax (STT) is all set to become an effective tool for generating intelligence about
income made from market operations. The Central Board of Direct Tax is examining ways of using the
STT data on the lines of annual information return (AIR) to nab tax evaders.
The board had, earlier this year, set up an internal committee to examine how STT data could be used to
generate intelligence on tax evaders. The committee has submitted its recommendations, which are being
examined now. The data contained in STT returns is quite useful for verification of the genuineness of the
transactions carried by investors or trader with PAN serving as a link. With the boom in stock market
attracting many more, the income tax department feels that STT data could turn out to an effective
intelligence tool to track tax evaders.
6 Tax sop to post office savings
This could be an early sign of what voters can expect in Budget. In a move that should please a large
number of investors, the government has brought the five-year post office time deposit account and
senior citizens savings schemes on a par with bank deposits by putting them in the Rs 1 lakh exemption
basket. The two schemes will be able to avail tax exemption benefit under Section 80C of the Income Tax
Act, 1961 from April 1, 2007.
Further, it has also announced a 5% bonus on post office monthly income account (POMIA) scheme. This
benefit will be available on investment made under POMIA in respect of new accounts opened under the
scheme on or after December 8, 2007. Together with the bonus, the effective yield will be 8.9% as against
8.3% presently available under the scheme.
6 BANK & NBFCs
2007- The year of customer service
1. RBI gets closer to clients
About 35,000 credit card customers of Citibank received free tickets worth Rs 23 crore in early 2007
under the ‘Fly fore Sure’ promotional campaign undertaken by bank in 2005. The customers became
lucky after the RBI about consequences if customer complaints were not redressed and commitments
made under the promotional scheme not honoured cautioned the bank. The RBI stepped in after receiving
a deluge of complaints accusing Citibank of not keeping its promise under the “Fly for Sure” scheme. The
bank subsequently owned up its mistakes and decided to provide air tickets to its credit card customers.
Citibank has more than three million credit card customers.
The ‘Fly fore Sure’ episode allowed the RBI to go the whole hog in pursuing its customer service
initiatives. The central bank had set up a customer service department in July 2006. “Fly for Sure’ was a
time-bound promotion by Citibank from October 1 – December 31, 2005, promising to reward the
customers who spent a specified minimum sum using their credit cards within a specified time.
However, in March/April 2006, the bank realised that there were ‘actualisation’ issues in the campaign as
the third-part service provider, to whom Citibank had outsourced the work, did not adhere to the terms of
the agreement. Citibank immediately intervened and decided to undertake the entire process in-house. The
bank’s first step consisted in a comprehensive customer contact exercise whereby it contacted all eligible
customers through post/phone/email and confirmed their travel preferences and ticketed them.
The RBI’s customer service department has been very vigilant since the Citibank incident. The
department conducts impromptu inspections at bank branches to check that customer service guidelines
were being followed. Banks should provide banking services and not get into promotional activities. If
they promise freebies under a promotional offer, they should honour the commitments made. Recently, a
bank started a scheme promising Santro cars to its customers. The RBI asked the bank to submit a list of
names of customers to whom it gave Santro cars. This was a surprise check to ensure that the bank was
honouring its promise.
The central bank, in a circular, directed the bank chiefs to train their branch level staff on customer
service related issues. This was after the RBI conducted a random inspection of bank branches to
ascertain whether its guidelines were being complied with. The inspection revealed that the branches were
neither aware nor were they implementing the guidelines. Some banks do not even have a customer
service committee and where such committee exists, they don’t meet regularly.
The central bank has noticed that many banks have not internalised its customer service instruction. Bank
officials at some branches still insist that customers open a fixed deposit to get a locker, don’t obtain
nominations for deposit accounts and don’t accept soiled notes.
To address the issue of growing complaints from credit card holders, the RBI has directed select banks to
explain their credit card bills to the customers.
The rising instances of social distress on account of excesses committed by banks’ recovery agents also
came under the RBI scanner. It was quick to warn banks of strong regulatory actions and also issued
guidelines but for the collection agents.
2. Trend and progress of banking in India 2006-07
In its report on trend and progress of banking in India 2006-07, RBI said, rapid credit growth in the last
three years lead to higher slippages of NPAs in the loan portfolio of banks. The central bank has also
warned that a crash in stock could increase bad loans even if banks do not have a direct market exposure.
This is because borrowers exposed to stock markets may default if shares tumble. According to RBI, if
interest rates rise sharply, banks will show losses in their books due to fall in the value of their bond
portfolios. A sharp rise in interest rates could also make repayment unaffordable for those who have
availed floating rate loans. Also, the sharp adjustments in real state prices might have some implications
for the balance sheet of the banking sector.
RBI Deputy Governor Rakesh Mohan said, “The strong demand for homes and home finance is expected
to keep property prices firm, posing a risk to the banking system, given the absence of transparency in the
real estate sector. The elevated realty prices along with non-transparency in the real estate sector may
lead to an “asset bubble” and pose risks to the banking system.”
3. Phenomenon of simultaneous volatilities
India cannot be immune to global developments but we, in the RBI, are actively monitoring the global
developments, articulating our assessment as well as responses in regard to impact on India and are in a
state of readiness to act, as appropriate, in a timely manner. The major reason for extraordinary vigilance
by RBI is what I would describe as simultaneous volatility in several globally significant markets, namely
money, credit and currency markets; asset prices; and commodity prices. The current phenomenon of
simultaneous volatilities should be viewed in the context of possible repositioning of the world’s
dominant reserve currency, involving significant wealth, income and terms of trade effects.
4. Preference over PE pools of investment
While it is early days yet, bankers are witnessing a trend where companies prefer tapping into PE pools of
investment than opting for bank loans. A few banks report that despite sanctioned loan commitments,
some of the companies have not come back for disbursal. They have instead tapped into PE investors.
Experts argue: “As growth equity investors, PE investors look at high growth sectors including business
services, healthcare, financial services and media & consumer. Traditionally, these companies, since they
are not asset-based would not have access to bank financing and instead would look to private equity.
Companies even see benefits from PE firms who also act as strategic advisors and not just sources of
capital. PE investors provide companies with a global network required for expansion and advice on a
variety of issues including strategic M&A, corporate governance, board development, etc.
However, companies generally prefer a specific debt-equity capital mix based on their risk appetite.
Hence, PE capital is unlikely to replace debt. In fact, in the long run PE investment into firms will help
companies expand their capital base which they can leverage further to finance their growth requirements.
Even banks will be comfortable in lending to these companies with a greater capital base and established
PE name on their boards. Therefore, PE investment will actually boost bank lending in the long term.”
6.1 SECURITY LAWS
Real Estate Investment Trust (REITs)
The Securities Exchange Board of India outlined a set of draft regulations for the functioning of real
estate investment trusts, paving the way for implementation of this scheme in India. The draft includes
various prerequisites for any entry to launch a REIT scheme, including the valuation aspect, which has
been considered a key roadblock to the launch. The market regulator said every such scheme should
appoint an independent property valuer, who values all the real estate under the scheme after physical
verification.
One of the proposals is that the REIT should be in the form of a trust created under the Indian Trusts Act.
Trustees should be either a scheduled bank, trust company of a scheduled bank, public financial
institution, insurance company or a body corporate. A scheme should be launched by a trust and managed
by Real Estate investment Management Company, with both parties having to register with Sebi.
Only close- ended schemes can be launched by the trusts, and these schemes have to be listed on the stock
exchanges mentioned in the offer document.
The valuation methodology shall follow the ‘valuation standards on properties’ published from time-to-
time by the concerned Indian institute or the international valuation standards issued from time-to-time by
the International Valuation Standard Committee, the draft proposal said, while listing the requirements of
the independent principal valuer.
On investment limitations, Sebi said a REIT, under all its schemes, should not have exposure to more than
15% of any single real estate project. While it can buy uncompleted units in a building, which is
unoccupied and non-income producing or in the course of development, the aggregate contract value of
such real estate should not exceed 20% of the total net asset value of the scheme at the time of acquisition.
Further, it said REIT, under all its schemes, should not have net exposure to more than 25% of all the real
estate projects developed, marketed, or financed by the same group of companies. The scheme is
prohibited from investing in vacant land or participating in property development activities. The market
regulator has put some restrictions on the borrowing capabilities of a REIT scheme for funding
investments and operating expenses.
Accordingly, a scheme cannot borrow more than one-fifth of the value of the scheme’s total gross assets.
While the scheme can mortgage its assets for such borrowings, the REIT should disclose its borrowing
policy in its offer document, including its maximum borrowing limit.
The market regulator said the scheme should distribute not less than 90% of its annual net profit after tax
as dividends every year to unit-holders. “The real estate investment trust shall determine any revaluation
surplus credited to income or gains on disposal of real estate, which shall form part of net income for
distribution to unit-holders.
7 MISCELLANEOUS UPDATES
Urban Land Ceiling Registration Act (ULCRA), Maharashtra
The Vilasrao Deshmukh government cleared the first legislative hurdle. The Urban Land Ceiling Act, one
of the last vestiges of the socialist era, is set for a burial in Maharashtra. The long-awaited decision will
unlock huge chunks of land in Mumbai and other cities in the state. Analysts estimate that close to 76,863
acres may be released in nine urban conglomerates across the state. Mumbai alone will get around 17,000
acres for fresh development. Real estate activity in other cities like Thane, Pune, Nagpur, Nashik,
Kolhapur, Solapur, Sangli and Aurangabad would also get a boost.
Introduced by the late Indira Gandhi during the emergency with lofty socialist objectives, ULCRA ended
up serving what it was not meant for. Instead of being a tool to provide low-cost housing for the poor, the
act helped politically connected builders to get land selectively released for development.
It took 22 years for the Centre – and 29 years for the Maharashtra government – to realise the futility of
the Act. The Maharashtra government finally had to give in as Centre refused to sanction funds for the
state’s ambitious urban renewal mission. The state has nearly 88 projects, entailing an investment of over
Rs 25,000 crore, awaiting the Centre’s clearance under the Jawaharlal Nehru National Urban Renewal
Mission. Under the scheme, the Centre would share 35% of the project cost provided the state undertakes
urban reforms. Besides this, the state has infrastructure projects worth Rs 40,000 crore lined up for
Mumbai, which also need the Centre’s assistance.
Indian Boilers (Amendment) Bill, 1994
With the passage of Indian Boiler (Amendment) Bill, 1994, in Parliament recently, private parties will
now be allowed to inspect and certify whether the boilers are fit for use or not. Also, amending the
mandatory inspection in every 12 months, the government has introduced “flexibility” in deciding when a
boiler should be inspected.
The Boiler Act was formulated in 1923 because of safety concerns in commercial establishments and
factories. Way back in 1972, it was first thought that some provisions of the Act needed to be changed,
and a high-powered technical committee was set up. For years, the recommendations of the committee
were discussed, but the cabinet note was moved only in 1993. The amendment Bill was introduced in
Parliament in 1994.
Minister of state for industries Dr Ashwani Kumar said that the amendment itself was one of the major
reforms undertaken by the government. We have done what has been pending for years. In sectors like
oil, gas and power, stopping of a boiler for inspection even for a day could lead to a loss of production
worth crores of rupees. With the advancement of technology, why do we need inspection of boiler in
every 12 months? If considered necessary it could be done earlier, but it could also be done once in say 24
months. At the same time, we have increased the penalties from Rs 1000 to Rs 1 lakh.”
Congress MP and Jindal Steel and Power Ltd vice chairman & MD Naveen Jindal said that the
amendment would mean a lot for Indian industries. “For a long time, boiler inspectors have harassed
many industries in the name of inspecting boilers. They are very corrupt and create problems for many
industries. We have estimated that Indian industries will be richer by at least Rs 10,000 crore every year
because of the new law.
7.1 REALTY SECTOR
Check out before checking in
The real estate sector has experienced a phenomenal growth over the past few years. According to Arvind
Parakh, CEO, corporate strategy & finance, Omaxe, the ‘fragmented’ nature of the industry will change
once more companies go public, thereby making promoters adopt a proper corporate structure. The year
2008, he feels, holds a lot of opportunity and challenging times in store for the realty industry.
But if stockmarkets fire, can a realty boom be far behind? In fact, the real estate sector will be the
cornerstone of the India’s growth story, said Mr Parakh. With the growing availability of cross-boarder
capital, high level of entrepreneurship and a huge pent-up demand, the realty sector will see an
exponential growth in the years to come, he said.
He felt that real estate as an asset class had evolved big time and it has potential of going up to 4% of
GDP. He, however, felt that the biggest challenge was to raise funds because the sector is largely
fragmented and unorganised. The sector is likely to grow up to $ 50-60 billion over the next 6-8 years. He
also understood the need for better regulation. A proper regulatory framework needs to be in place before
real estate can emerge as an asset class.
Rent or buy
With real estate prices at all-time high, investors are unsure whether to buy a property or stay on rent. Mr
Parakh feels this decision depends on your ability to service the debts. “Ideally, for your own occupation,
you may aggressively borrow a little more as it is a life-time decision to have your own property.
However, if it is an investment, you should take care in choosing the amount of investment and the
location, which would be able to appreciate in value or give enough rental income to service the
obligation.
Check-in or pre-construction
Parakh believes that if you are looking for an apartment/house in the bracket of 6000-7000 per sq ft area,
then ‘ready-to-move-in’ flats will be a good idea. However, if you are opting for a house in the lower
bracket, then it is desirable to go for ‘pre-construction’ as higher specification material of your choice can
be used. He cautions that as the prices have gone up in the last two years and have not seen a major
correction, investment in property at today’s market rates should be done with an objective of a
reasonable return in a period of at least three to four years.
Verify before buying
According to Parakh, while buying a house, you should verify the title of the plot and necessary
approvals/sanction of the plans. “You should also check on the necessary approvals required by the local
authorities. These approvals should be carefully inspected and the decision should not be taken on
hearsay, that is, if approvals are pending or applied for. Unless the approvals are in place, you should not
take the decision of buying the house,” he says, adding as an investor, it is pertinent that you should check
the developer’s track record.
7.2 TECH-TRACK
It’s no more hunky-dory story
It’s not all hunky-dory for India’s $ 40-billion high-profile IT sector. Impending taxes, rising rupee,
falling margins, expending domestic economy and zooming salaries – all this and more will put IT on the
watchlist for 2008. India’s greatly admired IT sector is at the cross-roads – with falling market caps and
margins, some have been predicted a downslide.
Though the global outsourcing market remains healthy as companies in the US start cutting costs to
survive the imminent slowdown, in the short term, the smaller companies may face pressure. As the
campaign for US President Elections – due for November ’08 – gathers steam, we may see fewer deal
announcements. This will affect hiring and salary hikes in India in IT sector.
Tech stock IT focused mutual funds are certainly not going to see a boom. But investor outlook is still
strong on domestic BPO market and also the knowledge process outsourcing services. The KPO services
in niche areas may attract a lot private equity. Legal and business research, clinical trials, drug discovery,
Pharma research and Equity research will gain further traction and higher billing rates. Margins will be
good in KPO and BPOs will try to align their business models towards KPO services, which mean lesser
growth in BPO jobs. E-governance will boom as will the domestic BPO services market. IMB has
recently bagged an over $ 1 billion deal from Airtel and Vodafone each. Consolidation and more buyouts
will be seen as small companies exit IT and BPO. Overseas buyout will continue as a major trend.
On the Internet front, Web 2.0 will gain currency in India with more and more Indian social networking
sites becoming popular. 3D applications like Google Earth and Yahoo Maps will become popular
globally. Internet penetration will also increase. Removal of regulations on the part of government on
IPTV and domestic VOIP calling fronts is likely to make the PC and broadband penetration zoom. But
sadly things are not moving very fast because of pressure from cellcos, who have vested interests.
On the IT technology trends front, we may see more and more alternative delivery models coming into
play. Global research firm Gartner lists a set of 14 different alternative deliveries IT models, which will
become a trend. These include:
• Business process utilities,

• Storage as a service,
• Grid computing,
• Virtualisation,
• Capacity on demand,
• Remote management,
• Software as a service,
• Software streaming,
• Web platforms and
• User owned devices
Companies are also buoyant on these IT trends. The enormous opportunity presented by growing and
mid-size businesses will also help shape IT trends. In all, 2008 will be a great year for new tech trends in
gadgets, IT delivery models and Internet. But the pillars will be IT and BPO services companies involved
in routine IT application, development and maintenance work. The rupee is expected to gain at least 5-7%
in the next 12 months. It will be interesting to see how Indian companies perform under pressure. That
will determine the resilience of the IT companies’ financials, their brand equity and also their future.
8. KNOWLEDGE RESOURCE
Some insights of wealth creation
The basis:
Motilal Oswal Wealth Creation Study identified the top wealth creating companies in the Indian stock
market and was aimed to understand and identify triggers and criteria behind wealth creating companies.
Each year study has been conducted to track the performance of companies for preceding 5 years and
single out those have registered the most spectacular growth in market capitalisation.
These stocks, referred to as ‘Most- Inquire 100’, are further sieved to arrive top-10 ranking companies in
terms of Speed of Wealth Creation (called The Fastest); the top-10 ranking companies in terms of Size of
Wealth Creation (called The Biggest); and the top-10 ranking companies in terms of their frequency of
appearance as wealth creators in studies (called The Most Consistent).
While analysing the trends in wealth creation over the last decade, Raamdeo Agrawal, Director and Co-
founder, Motilal Oswal Financial Services, said that the period 2202-2007 has seen one of the highest
level of wealth creation. Talking about market fundamentals, he said as long as the markets are in the grip
of fear and rationality it remains bounded to solid earnings, solid cash flows and solid management. It is
very important that you buy good companies at right valuations.
Motilal Oswal Financial Services Ltd has been awarding wealth-creating companies over the past 11
years. At a grand function held on 14th December ’07, the companies were awarded on the basis of
Motilal Oswal’s 12th study of wealth creating companies. The chief guest for the function was Infosys’
co-chairman & member of the board, Nandan Nilekani.
Mr Nilekani shared with the audience the Infosys journey over the last 25 years. He recounted how
Infosys was conceptualised with a modest capital of Rs 10,000 to become a 4 billion dollar company
(March 2008 estimate) today. Nilekani pointed out that an investor who bought 100 shares of Infosys in
1993 (when the company had its IPO at an offer price of Rs 95 per share), would today have his
investment valued at Rs 2.24 crore (market price of Rs 12,000 per share)!
The biggest wealth creators:
In terms of total wealth created, Oil & Gas industry players lead the pack, followed by banks, engineering
companies and IT sector stalwarts. Reliance made its way to the top to emerge as the biggest wealth
creator. Alok Agrawal, President (Finance), Reliance Industries attributed his company’s exceptional
performance to two main attributes – work and hard work.
The study also reveals that large companies, which were not in the reckoning during the last five years
due to lack of profits, have now performed well. It explains, “Bharti and SAIL are large companies, but
were unpopular in 2002 due to lack of profits. Low visibility of profits laid the foundation for huge wealth
creation at a rapid pace.”
“Invest in companies which are large yet unpopular, if the fundamentals merit your investment. Available
at low prices, these stocks are potential multi-baggers, promising considerable returns at brisk rates.”
The fastest wealth creators:
Bharat forge (BF) Utilities is the fastest wealth creator for 2002-07, with a blazing 5-year stock price
CAGR of 267 per cent. BS Mitkari, Vice President Finance, BF Utilities, attributed the company’s
outstanding performance to the management’s foresight and the risks taken by the company.
The study also states that in most cases, stock price CAGR have a strong correlation with the PAT
CAGR. However, in the case pf BF Utilities, its real estate asset holding have unlocked potential, which
has driven its stock price rather than its earnings.
“Look for companies which are sitting on gold mines in the form of real estate. As the study advises, the
real estate sector as a wealth creator in the stock market is the latest phenomenon. The future will see this
sector growing bigger and faster than many others.”
Most consistent wealth creators:
Wipro is the most consistent wealth creator. Keyur Maniar, Vice President, Wipro BPO contributed his
company’s success to their focus on values and on building people intellect.
An analysis of the most consistent wealth creator over the last three years indicates that consumer-facing
companies like FMGC, auto, financial services and pharmaceuticals have been consistently delivering.
“Choose some companies from industries that are not very cyclical in nature. The non-cyclicality of
business has emerged as a key driver of steady wealth creation.”
Comparative performance of the Wealthex V/S BSE Sensex:
The Wealthex is an index comprised of the top 100 wealth creator. It is compared with Sensex on the
basis of three parameters – market performance, earnings growth and valuation. The Wealthex
outperforms the BSE Sensex on the basis of all three parameters.
“The top companies may come at a price but it pays to be invested in them.”
New Economy V/S Old Economy:
The wealth creators in the old economy businesses continue to outperform those in new economy
businesses, viz., IT, telecom and media. However, new economy companies are beginning to assert
themselves, with their share of wealth rising every year.
“Shift some part of your portfolio to new economy stocks, to leverage their earning growth potential.
Watch out telecom, real estate and engineering sectors. They are expected to grow big and grow fast.”
Size: small V/S Big:
The data indicates an inverse relationship between market capitalisations and speed of returns, i.e., the
smaller the market cap, the larger the returns and vice versa.
“Small companies with ambitious and aggressive plans can be kickers for higher returns in any
portfolio.”
Sales and Earnings Growth:
The sales growths of sunrise companies have been more than 50 per cent.
“Sunrise companies will continue to do well in the future.”
Return on Equity (RoE):
When the company is registering high RoE, it is tough to find them cheap. Bargains are available when
the changing dynamics of a company’s business are not apparent to the market.
“Consumer-facing companies have modest earning growth but promise disproportionate high market
returns for a reasonable low level of risk.”
Valuation parameters:
Some interesting facts that emerge from the classification of wealth creators on the basis of simple
valuation parameters –
• A bulk of the wealth created (61%) is by stocks bought at PE of less than 10x;
• Out of the top 100 wealth creators, 45 were available at Price/Book of less than 1x in 2002;
• More than half the top 100 wealth creators had a Price/Sales ratio of 1x or less in 2002;
• As much as 67% of the top wealth creators presented a payback opportunity of less than 1 x.
“The sure shot formulas for multi baggers are
a) P/E of less than 10 x
b) Price/Book value of less than 1 x
c) Price/Sales of 1 x or less
d) Payback ratio of 1 x or less.”
Wealth destroyers:
The data reveals that fortunately, only 2 per cent of the wealth created by the top 100 companies was
destroyed.
“A caution from the report: “Even blue chips like HUL and HPCL occasionally end up as wealth
destroyers. So, it is important to get the earning direction right, and more importantly, pay the right
purchase price.”
9. INSURANCE
Cover drive on the front foot
Today, life insurance is not only a protection but also a long-term wealth creation tool. According to Gary
R Bennett, managing director and CEO of Max New York Life Insurance, the four mandatory covers that
you should have are – death, critical illness, disability and accident. He expects that in the year 2008,
insurance companies will come out with more diverse products, which will be in sync with the consumer
needs and demands.
Underlining the key challenges facing the Indian Insurance sector, Gary R Bennett, CEO, Max Life,
underlined the need for proper training and guidance of customers. Supporting his arguments with facts
and stats, he pointed out that 95% people in India were not in a position to support them for more than a
year if a tragedy struck the main bread earners, while 36% people couldn’t spend on insurance products.
He, however, said the Indian industry is at an incredible point in time and there’s a huge pent-up demand
for insurance products. The opportunities are outstanding and we don’t see a market saturation happening
for at least 20 years. Mr Bennett advocated for a broader and balanced asset portfolio for Indian investors
and felt insurance shouldn’t be seen as a short-term profit-making instrument. “We need to make it a
long-term legacy.”
The right cover
Although there is no thumb rule on the life insurance covers required vis-à-vis the annual income of the
insured, a SWOT analysis can help you reach at a sum that will suit your needs. According to Bennett, the
life insurance cover depends on multiple factors such as income, expenses and liabilities, dependents and
other source of income such as spouse income. “However, to ensure that the family is able to maintain the
income flow equal to your last income drawn, the life insurance cover should be roughly 8-10 times of the
annual income of the insured,” he advices. Bennett further emphasises that before opting for any
insurance policy, you should take the advice of experts, do a need analysis and look at your budget to
decide your investment in life insurance cover.
The new range
Although there has been an over-emphasis on life insurance as investment tool in recent times, the Indian
households, however, are now becoming more aware of the risk they – carry both of mortality and
morbidity. According to Bennett, in 2008, life insurers will lunch more protection-oriented products to
meet those needs. “I expect a growing range of health-oriented protection products hitting the market. In
view of growing life expectancy and less fixed pension plans on offer, I expect the retirement category to
see more product launches.” Also, with the equity markets doing well and the Indian economy expected
to grow at a steady pace, investment products – especially ULIPs – will continue to rule the markets.
Why ULIP?
A balanced approach for investing means that you should have equal distribution of different investment
products in your portfolio. Bundled products are already available in market in the form of ULIPs.
Bennett feels that such products are necessary essentially for those who are in the hinterland and don’t
have exposure to direct equities. “I have always been in the favour of bundling of protection and
investment as this brings discipline in investment as well as provides protection, which is essential for
under-insured Indian households.
NOTHING TO HIDE
Radical transparency
Alka Agrawal
Promoter of Mi7 & SAFE
Financial Literacy Mission

A crash course of literacy
Missions Seven Charitable Trust

120/714, Lajpat Nagar, Kanpur - 208005
Phone 0512-2295545
Safe Financial Advisor Practice Journal: January 2008

Journal of FInance Vol 13

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1. CHEERS TO THE NEW YEAR!

Trends that will shape the world

Blue is the new Green

Just another milestone: sensex at 20k

31/08/07 (Friday) – 15,318.60

Adopt a long-term strategy

• The privatisation and deregulation of key industries,

Current risks however include but not limited to:

• A major slowdown in the US economy,

Watch out for the street signs

Is this as good as it called?

Big boys rule game despite Sebi’s efforts

The Next-Trillion-Dollar (NTD) Era… 2007 to 2012

1) The Macroeconomic exponentialities:

3) Exponentiality in corporate profits

4. US short-term interest rates are bound to fall significantly:

5. Inflation is largely a food-and-energy-related problem worldwide and is unlikely to spillover:

6. Stocks face a challenging year due to deteriorating earnings growth:

10. Democrats regain the White House:

Choose a good fund

Investing in Thematic funds

Best equity funds

Get a PAN card first

Agri or base metals

5. Continuing learning centres

6. Issues of the present

1 Last date of filing return extended to Feb 29

2 CBDT reopens 400 PE & M&A deals

4 Service charges and tips are not wages: SC

5 Taxhounds to sniff out evaders with STT

6 Tax sop to post office savings

1. RBI gets closer to clients

3. Phenomenon of simultaneous volatilities

4. Preference over PE pools of investment

Real Estate Investment Trust (REITs)

Urban Land Ceiling Registration Act (ULCRA), Maharashtra

Indian Boilers (Amendment) Bill, 1994

Verify before buying

• Business process utilities,

The biggest wealth creators:

Most consistent wealth creators:

Comparative performance of the Wealthex V/S BSE Sensex:

New Economy V/S Old Economy:

Size: small V/S Big:

Sales and Earnings Growth:

“Sunrise companies will continue to do well in the future.”

Return on Equity (RoE):

“The sure shot formulas for multi baggers are

a) P/E of less than 10 x

b) Price/Book value of less than 1 x

d) Payback ratio of 1 x or less.”

The right cover

The new range

Financial Literacy Mission

Missions Seven Charitable Trust

Safe Financial Advisor Practice Journal: January 2008

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