Friday, September 29, 2006

>Gold & Hedge Funds

"They are not all geniuses."

That was the verdict from colleague Dan Denning, who is visiting the office this week.

"There are something like 8,000 hedge funds," he explained. "But there aren't 8,000 different trading strategies. Let's face it, these guys all study the same models and same theories."

We were having breakfast together. There, on the table between the toast and the tea, was the subject of discussion: do all these hedge funds and other sophisticated financial paraphernalia really make the world markets more stable?

"No," was our conclusion.

There are two ways of looking at it:

On one hand, some of the brightest minds in the financial industry have been occupied with the task of convincing investors that the proliferation of derivatives and derivatives of derivatives...and derivatives of derivatives of derivatives...actually help make the markets more stable. Investors themselves have noticed a remarkable lack of sturm und drang in the trading pits. The professionals explain that it is because sophisticated; globalized, information-drenched markets disperse risk.

"But they don't really disperse it at all," says Dan. "They aggregate it. They all trade the same things using more or less the same strategies and formulas."

Every hedge fund manager's head pulsates with the same delusions...the same superstitions...the same prejudices...and the same low predilections. Each pretends he is a disinterested scientist, carefully studying the markets with the precision of a Poincare and the intuition of an Einstein. But he is no such thing; he is actually more like a hair-stylist...ready to coif his portfolio to suit the latest trends and fashions. Yes, he makes his customers look like jackasses - for who would really want his money run by a barber?

But at least they look good when they go out in public. And if he charges a lot for the service - 2 and 20 is the going rate - who can argue with it? Hedge funds are a form of conspicuous consumption; lowering the price would destroy the whole illusion!

But now the gumshoes are taking a look at this happy swindle. Timothy Geithner, chief of the New York Fed, seems to have taken up Dan's point. Hedge funds, he says, are a "major risk." The derivatives market may be concentrating risk, rather than dispersing it, he says. He adds that neither hedge funds nor derivatives have "ended the tendency of markets to occasional periods of mania and panic. There are aspects of the latest changes in financial innovation that could increase systemic risk in some circumstances by amplifying rather than dampening the movement in asset prices."

And even the FBI is on the case. The team that J. Edgar Hoover built is worried that hedge funds may be "luring small savers in to risky investments," according to the Telegraph. Chip Burrus, speaks for the
lawmen: "People that aren't expecting to have this type of risky investment in their portfolio end up taking a bath...[they] just get fleeced left and right."

What business it is of the FBI - investors taking losses was never before on the G-men's beat - we don't know. But hedge fund managers - beware!

Soon the Department of Homeland Security may be rounding you up and sending you to Syria for water boarding.

And not a moment too soon.

*** Gold has risen over our $600 target price. But barely. What's ahead for the metal? If only we knew!

So far, there has been nothing unusual about the gold price action. It was under $300 when George W. Bush took office. Since then, it shot up with other commodities - to over $700...far outpacing the returns you were likely to get from any other major asset class.

As gold gathered momentum and press coverage, the need for a correction increased. From $725 an ounce on May 12, the price fell to $567 on June 20th. Since then, it has been up and down and nowhere in particular, 'building a base,' say the pros, for another move upwards. We now may be at the beginning of that next move to the upside.

But this assumes that we are right about the major trend. We judge gold to be in a bull market. For two decades, the price of gold fell. Now, we figure, it is going in the other direction. Of course, it is more than that. A lot has happened during those two decades.

The world's supply of 'money,' debt and credit has vastly increased. By contrast, the supply of gold hasn't even kept up with increases in GDP. And while there is no reason that gold should go up with increases in GDP, credit derivatives, beer or anything else...there is still a tendency for things to go wrong from time to time. And when things go wrong, people begin to hunker down...and wonder what they really have...and what it is really worth. They watch their hedge fund accounts blow up...they see their dollar bills shrink by inflation...they look at the news programs and realize their stocks are only worth a fraction of what they were a few days before...they talk to their neighbors and realize that their house is worth only half what they paid for it. What can they do?

They reach for something solid to hang onto - something real...something that holds up under pressure. They reach, traditionally, for gold.

Gold is not a perfect money. Nor is it a perfect way to store wealth. But its defect in good times becomes its virtue in bad ones. When the going is good, the returns from gold can't match what you get from a heavily leveraged hedge fund or a house in a hot market. But when the going gets tough, gold gets going...and soon passes all the burnt out hulks of hedge funds...and bombed out houses...and worn-out bonds.

We don't buy gold to make money; we buy it not to lose any.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.

>Futures Trading Restrictions

Here are some ideas from a friend, Dinesh C Nagpal.
There are many open questions and if you have a view you are invited to leave a comment.

A great attraction for FII interest in INDIA is stock Futures. Developed markets like Japan, Europe, US have the focus on stock options and index futures and not stock futures.
While stock futures is heavily traded in INDIA.

Why would stock futures appear attractive to FIIS?
Why did stock options didnot catch the fancy of Indian markets as strongly as Stock Futures?

SEBI and some wise guys want this to change and that's why they plan to put a lid by disallowing stocks as security for F&O trades. This may lead to more trading in options in which a speculative position can come for much less margin.

Will this make the markets more VOLATILE since you earn in OPTIONS only is extreme movements. How will this effect intraday futures traders. Will they shift to trading options or resort to using more leverage in cash trading?

How will the income of
Brokers change due this? I think that if trading in options increase Brokers would earn more, since the same trading amount can purchase many more lots of call/put options when compared to futures and this generate more Brokerage.

SEBI is right now as confused as a naive trader/investor, first last December it banned 3rd party funding by brokers, then they increased span in f&o and then did a u-turn by reducing lot size in f&o and now wants to push option trading.

Futures is a carrot which attracts many traders to the market. What will happen if all the futures traders start chasing the cash market? Will this new money have a super inflating effect on cash scrips and lead to even wilder run ups in mid caps on huge volumes?

On a different note is this an arm twisting method to ask investors / traders to invest in MUTUAL FUNDS ? Who claim via several deceiving ways to give you a house in the moon. The funds nowadays come out with so many schemes with so many ads that an average investor does not trace an old scheme. Money keeps jumping from scheme to scheme, fund to fund by investors. Every time 2% of NAV which looks small but eats into the tiny profits you make.
Anyone who invested in the 90s' in GIC, LIC, PNB, BOB funds with 3-5 years lock took large hits.

We as a trader how can we make use of this opportunity?
How should we shift our thinking and focus in case the futures trading is stopped?

Tuesday, September 26, 2006

Monday, September 25, 2006

>Who am I?

Who am I?
I am your constant companion;
I am your greatest helper or your heaviest burden.
I will push you onward or drag you down to failure.
I am at your command.

Half of the tasks that you do you might just as well
Turn over to me and I will do them quickly and correctly.

I am easily managed; you must merely be firm with me.
Show me exactly how you want something done.
After a few lessons, I will do it automatically.

I am the servant of all great people
and the regret of all failures as well.
Those who are great, I have made great.
Those who are failures, I have made failures.

I am not a machine but I will work with all its precision
Plus the intelligence of a person.

Now you may run me for profit or you may run me for ruin.
It makes no difference to me.
Take me, train me, be firm with me and
I will lay the world at your feet.
Be easy with me and I will destroy you.

I am called Habit!

Some related articles
  • >Mental Toughess is 90% of the Game
  • >The Mentality of the Successful Trader
  • >Why is Trading Difficult
  • >Trading with an open mind
  • Thursday, September 21, 2006

    >Incredible India—Formidable Futures

    There is a campaign to promote tourism in India called Incredible India. This nicely alliterative slogan appeals to our quest for the different, for the exotic. There is a lot of the exotic in India, but are Indian futures really all that different than those traded in Chicago or London?

    Well, to a corn-and-bean Midwesterner, or even a jaded New Yorker, guar seeds, chana and urad sound pretty exotic and they just happen to be the first, second, and fifth most actively traded physical commodity products in India.

    Over the next few pages we will explore the main features of futures markets in India by contrasting them with their siblings in the United States. We do this not to make judgments about one being better than the other, but rather to help us to know something new by comparing it to something already known.

    read more on this interesting article.... here>>

    Wednesday, September 20, 2006

    >Computer Safety

    Though this log is devoted to market, I think this post will help a lot of traders safegurad their pc.

    Keep the following with your for great performace and safety.

    1. Firewall is a must and i trust Zone Alarm free
    Use of Firewall is first defense. Like keep home clean.

    2. Antivirus I trust Avg Antivirus Free
    You can also try Anti-Vir Free

    3. Spyware remover. In case you get spies in ur comp.
    Especially if you use comp to acess online accounts.
    I trust Ad-Aware Personal

    Also try WindowsDefender 2 (you need authentic Windows license for this)

    Some more alternates are

    Now this is just my small list.
    If you love some other stuff do let us all know.
    Drop a link in the comments of this post.

    Tuesday, September 19, 2006

    >Amaranth Advisors Hedge Fund Lost $4.6 Billion

    Amaranth Advisors LLC, a hedge fund manager with about $9.5 billion in assets, told investors that its two main funds fell an estimated 50 percent this month because of a plunge in natural gas prices.

    "We are in discussions with our prime brokers and other counterparties and are working to protect our investors while meeting the obligations of our creditors," Nick Maounis, the founder of the Greenwich, Conn., firm, said in a letter to investors obtained by Bloomberg News. The funds, which had gained 26 percent through August, are down at least 35 percent for the year, or about $4.6 billion.

    more on Amarnath Hedge Fund here....>>


    WASHINGTON (MarketWatch) -- Rep. Mike Castle, R-Del., introduced a bill last week requiring regulators to study and make recommendations about hedge funds, Castle's office said Monday. The study should focus on disclosure of information, the congressman said. "Transparency in our financial system is important for market discipline and investor confidence," Castle said. Castle's bill comes as Greenwich, Conn.-based hedge fund Amaranth Advisors LLC is reportedly shutting down and returning investors' money following heavy losses on natural gas investments. In June, a U.S. court overturned an SEC rule requiring hedge fund advisers to register with the agency.
    more here>>>> Rep. Castle bill calls for study of hedge fund industry

    OTTAWA -- Analysts are predicting more financial carnage after one massive hedge fund told its investors that it is facing severe losses from enormous bets in the energy futures market, just a month after another fund went bust over its wagers in the same market.

    "A lot of funds that jumped into the market have been going long on natural gas, and in some cases, extremely long," said Ben Smith, managing partner with First Enercast Financial in Denver.

    more here> Analysts fear hedge fund losses in energy market tip of iceberg

    Monday, September 18, 2006

    >Datamatics Technologies

    Datamatics Technologies-In Fidelity we Trust
    CMP Rs 52
    Recent Order wins from US based mutual fund Fidelity, are likely to bring about a change in fortunes for the largest BPO and KPO concern listed in Mumbai. Solid financials for the Q2 ending September 2006, will provide the spark to this counter. We expect the counter to outperform the IT outsourcing workspace in the short run.

    Key Drivers
    The company is the largest player in the Content Management KPO domain
    in India, and is set to benefit from the growing opportunity in the years ahead
    DTL has been selected in the Top 100 Outsourcing Vendors worldwide at
    the 2006 Outsourcing World Summit
    DTL works on the variable employee model (Knowledge Associates) and so
    it can manage its utilization rates much better
    At current price the stock has a dividend yield of 4%
    The company currently has cash and investments in debt mutual funds of
    over Rs 30 per share
    The company is trading close to its 52 week low

    Datamatics Technologies Ltd (DTL) is one of the largest non voice third party business process outsourcing (BPO) company in India. It is based out of Mumbai & is the only listed non-voice BPO company in India. DTL currently has subsidiaries in the USA,
    UK and Germany. The company offers services are in the following domain
    Content Management
    Back Office Processing
    Related Software Services

    – DTL provides these services to large publishing houses, information providers, market research firms & litigation support providers. The company counts among its clients 4 of the world’s largest 10 publishers. The company currently provides services around data capture, copy editing, context addition, indexing, document conversion & formatting and is making inroads in high end services like editorial services and content writing. This segment is the most profitable.

    – This includes accounts payable, claims processing, accounting & tax processing, financial transactions processing, documents, forms & Text processing & Healthcare claims processing. Processing tax returns and
    managing accounts payables, especially for the US forms the bulk for this division’s revenue.

    – DTL provides related consulting services in partnership with FileNet & Hummingbird in Document Management & Workflows and Data Integration & Warehousing The company has technology alliances with Filenet, Hummingbird, Cognos, Ascential, Computer Associates, Informatica,
    KOFAX & Bizflow and has emerged as the premier workflow solutions provider based out of India.

    Shaping Up through Acquisitions
    In 1996, the DTL made a strategic Investment of about 5% in Saztec International Inc. In November 2003 DTL acquired the remaining stake and thereby it became a 100% subsidiary. In June 2003, DTL acquired 20% stake in Knowledgeworks Global
    Limited, Mumbai for Rs 10 lakhs. In September 2003, DTL acquired 100% Equity of CorPay Solutions Inc for USD 10.0 Million.

    Growth through Joint Ventures
    DTL formed a Joint Venture with Cadmus Communication Corporation (a NASDAQ listed company) namely Knowledgeworks Global Limited (KGL). KGL provides content processing, content management and related services to scientific, technical and
    medical journal publishers. The company had over 450 people on its payrolls as on 31 Jan 2006. Due to slower ramp-ups than expected KGL had an operating loss of Rs. 1.1 Cr for FY 2004-05. DTL has recently signed an agreement on 31 March 2006 to
    sell its entire 20% shareholding in KGL to Cadmus Knowledgeworks International Ltd, Mauritius at a consideration USD 1.5 Million.

    Knowledge Associates
    The Knowledge Associates programme gives the Company an access to a huge supply of skilled workforce. Through its Knowledge Associates programme the Company enhances its delivery capability by utilizing the huge untapped talent of
    qualified women professionals who are unable to do a full time job but would like to work flexible hours at home. The company currently has over 1405 Knowledge Associates and has extended this network in Nasik in March 2006.

    Content Management Opportunity
    The industry as a whole registered 41% growth to reach Rs 25,080 crore, up from Rs 17,830 crore a year earlier. The year also saw the emergence of knowledge process outsourcing (KPO) as a high growth opportunity & comprised vendors like WNS,
    Office Tiger and Datamatics Technologies providing higher-end research and analytic based services in traditional service lines as well as new business areas.

    The publishing vertical is emerging as a fast growing opportunity for the Indian KPO sector. Publishing services that are offshored today range from editorial and project management, to illustration, proofreading, page composition and layout. Some
    companies like DTL prefer to call this content management.

    Currently the bulk of the outsourced work is still pagination, data tagging and conversion. An Evalueserve report reveals that the Indian KPO sector, with revenues of 0.72 billion in 2003, accounted for 56 per cent of the global KPO sector. This share of
    the Indian KPO sector is expected to increase to 71 per cent of the global KPO sector, with revenues of $ 12 billion by 2010.
    The publishing vertical is expected to account for 12 per cent of the estimated opportunity. Evalueserve estimates the number of jobs in the KPO space will increase from the current 25,000 to more than 250,000 by 2010. However, it’s not always easy
    finding skilled employees. A recent NASSCOM release indicated a growing chasm between the demand for people proficient in programming languages like Quark and XML and the number available.

    For Datamatics Technologies (DTL), revenue from the content vertical – which includes the publishing vertical – has risen from Rs 389.93 million in FY04 to Rs 636.89 million in FY05. Lionbridge Technologies, a $ 400 million company that set up Mentorix
    – its publishing outsourcing platform in India in 2003 – says the international market for e-learning is expected to grow to from $ 6-7 billion today to $ 20 billion by 2008-09.
    The attrition in this industry is also high. There are a few innovative ways of handling this. Datamatics, for instance, pre-empted the labour shortage and distributed its workforce across geographies. Out of a 2000-strong workforce, almost 50 per cent are part-time home workers.

    DTL is one of the largest non voice BPO company based out of India. The company was highly profitable till 2003-04, but its operating margins have suffered ever since it acquired CorPay in US.

    The consolidated sales for 9months in FY 2005-06 was 101.4 Crs. The annualized sales for FY2005-06 are projected to be 141Crs. The Content Management Vertical has been growing at over 40% annualized over the last three years and has contributed to 50% of the companies revenues in FY2005-06 and is expected to contribute almost 55% of the revenues in FY2006-07. The companies revenues are expected to grow by 28% to over 180 Crs in 2006-07.

    As per the 2004-05 Balance Sheet, the company has over 99 Crs invested in Debt Mutual funds as on 31 Mar 2005. This along with the cash in hand and accruals over the last 12 months have resulted in cash and cash equivalent of Rs 30 per share as on

    The company has recently sold its 20% stake in KGL to Cadmus Knowledgeworks International Ltd, Mauritius for Rs 7 Crs. This will result in a capital gain of over Rs 4.5 cr and also improve the consolidated operating margins of the company as KGL was making operational losses.

    The EPS is expected to increase from Rs 3.62 for FY2005-06 to 5.16 for FY2006-07 – a growth of over 42%. The company is focusing on mining its existing clients and rationalizing the costs in the US Operations, which will help reduce the SG&A costs and improve the margins over the next one year.

    The company is only listed non voice BPO company and has grown at over 50% between 1999 & 2004. It lost this momentum post the CorPay acquisition, and is now focusing in managing the US costs. With over Rs 30 in cash & cash equivalents, it is trading at an adjusted PE of 9 for FY2005-06 & 7 for FY 2006-07. It is one of the cheapest share in the fast growing BPO & KPO space.

    Given the good prospects of the Content Management & KPO industry & the efforts made by the company to improve its margins.

    from Rajiv Handa

    >Kotaks Flat Rate..!! Is it really Flat?

    This industry is one where the service providers look for ways to juice out as much as they can from traders/investors. Dont go on name alone. See the detials under.

    Sent to me from Anurag Shukla. -- thanks

    Now is that flat ? !!

    Biofuels: Think Outside The Barrel

    Watch the video presentation here>>> Biofuels: Think Outside The Barrel
    Vinod Khosla is a venture capitalist considered one of the most successful and influential personalities in Silicon Valley. He was one of the co-founders of Sun Microsystems and became a general partner of the venture capital firm Kleiner, Perkins, Caufield & Byers in 1986. In 2004 he formed Khosla Ventures.

    ABSTRACT On Wednesday, March 29th, by invitation from our co-founders and CEO, our special guest, Vinod Khosla, visited Google to deliver a tech talk about the emergence of ethanol as a viable, market ready, and competitive source of renewable energy.

    His presentation has been making huge waves in the investor, policy, and business communities and we are privileged to have had him take time to talk to us about the tremendous potential for ethanol's explosion into the market. Here are some recent articles that might be of interest in relation to this talk:

    Vinod Khosla, a Silicon Valley billionaire, who wants to save the world from oil

    On the Ethanol Bandwagon, Big Names and Big Risks «

    Friday, September 15, 2006

    >StockMarket Books

    Hello friends.
    Hope the new arrangement allows downloading to hearts content..
    Also the collection would get updated weekly. Keep an eye !

    Arranged Topic Wise. (click and open in new window)

    Tuesday, September 12, 2006

    >Tentative Reliance Rates for RTrade

    Reliance brokerage charges for rtrade being inagurated soon.
    Brokerage Charges are on the basis of volume as per under.
    (Cash,Derivative,Forex or u can trade any product under this card)

    Rs. 500 - 1 Cr. volume(Max. 10% Delivery) validity-2mths
    Rs.1300 -3 Cr. volume(Max. 10% Delivery) validity-6mths
    Rs.2500 - 6 Cr. volume(Max. 10% Delivery) validity-12mths

    Transaction Cost : Rs. 12 per transaction

    One is through calling to ur broker then through reliance direct: they have a toll free number also then threough kiosks installed everywhere.

    Theres good news! most probably R-trade will start in the comming week!

    To heck with other high chargers..! at last. :-)

    Note: the figures are not official and this is what is generally heard on the street.

    Sunday, September 10, 2006

    >Rupee float to start a merry-go-round

    India's planned move towards full convertibility of the rupee will facilitate cross-border movement of capital, much of which could flow into the GCC's property and capital markets, experts and Non-Resident Indians (NRIs) here said.

    It is also a decisive step towards deriving the best from the enterprise of Indians living overseas, they said.

    "The removal of all controls on the movement of capital is a move in the right direction provided it is implemented in the right spirit," said Shailesh Dash, head of research at Kuwait's Global Investment House.

    "The free float would allow Indians [individuals or companies] to invest or acquire assets outside India or foreigners to remit funds for investment or acquisition of assets."

    With the real estate and stock markets opening up to foreign investment in the Gulf states, cash-rich Indians could divert funds here, Dash told Gulf News.

    India's central bank governor last week announced that steps would be taken towards fuller rupee convertibility in three phases starting next year.

    India made the rupee convertible on the current account in 1994, meaning that the currency could be converted freely for specific purposes such as trade-related expenses, business travel etc. But it still cannot be converted freely into foreign currency to buy overseas assets such as shares or real estate. Banks cannot accept deposits in many foreign currencies, and approval is needed for movement of capital across borders.

    "Essentially, full convertibility would lead to an exit of capital from India as well as attracting capital into India," said P. Krishnamurthy, Chief Executive of the Financial Services Division of the Al Rostamani Group.

    Foreign companies will be allowed to buy 100 per cent stakes in Indian companies and that would attract foreign investment in India, and Indian companies could invest up to 400 per cent of their net worth abroad, he said.

    "The GCC is already flush with liquidity that is looking for investment avenues. With full convertibility, India could suck in this liquidity. On the other hand, Indian mutual funds will seek opportunities in the Middle East among other markets. So there could be inflows into the capital markets here."

    Moreover, due to tax benefits, new laws and investor-friendly regulations, the Gulf's property sector would seem a magnet for Indians.

    "The Gulf, particularly the UAE, is the first point of destination abroad for many Indians, especially in recent years, due to higher taxation and strict scrutiny in the West," said Krishnamurthy.

    Dash concurred that the Gulf's property sector could attract investment from Indians following full convertibility of the rupee, but he said appreciation of property is higher in India.

    "The Gulf's property market may seem an attractive proposition for many Indians, especially businessmen, but there is the need for more clarity on the laws relating to leasehold or freehold," said N. Janardhan, Programme Manager GCC and Asia at the Gulf Research Centre.

    "Even if investments pour into the property sector here they might be speculative investments, not for the long term."

    As with most developing economies which have full convertibility, including many South-East Asian nations, rupee convertibility would diminish India's grip on the money supply, and would make necessary continuous monitoring and deterrence aimed at flows related to terrorism, crime and money laundering.

    "This would be a big concern for policymakers in India at the moment and India would also have to address how to integrate itself into the global currency markets," said an Indian money exchange house executive in Abu Dhabi.

    But as Krishnamurthy emphasised, in the long run it is a win-win situation for India as well as for other countries.

    Friday, September 08, 2006

    >Whats your market view?

    Whats your outlook for the market.
    New high and go much higher.
    Correct from previous top.
    Mild correction soon.
    Severe correction soon.

    Thursday, September 07, 2006

    >How oil consumers are duped

    When I tell people there is more oil in Canada than in Saudi Arabia, they look at me as if I just fell off a bar stool. Unfortunately, however, I am quite sober and the above statement is quite true and, ironically, sobering.

    The world has plenty of oil - not only in Canada, but Russia, China and right in the US as well. In fact, the only argument among geologists is whether there are 3 trillion or 5 trillion barrels of oil remaining beneath the ground. The real issue causing all the grief in the world is refining capacity. Simply put, over the past 20 years, the world's fuel consumption has increased almost 35% (thanks primarily to China, India and other emerging economies) but refinery and storage capacities have remained the same, most probably by design.

    >read more here

    Wednesday, September 06, 2006

    >Alembic Glass : cheating investors

    Check this day light robbery
    Share this with everybody you care as an investor!!

    Alembic Glass Limited: You can steal with a pen much more than what you can with a gun

    Summary: Alembic Glass Limited has around 150 acres of land in Bangalore.
    The company is now merging this listed company with another private company at an unfair valuation.
    The company has completely ignored the underlying asset, which is worth around Rs 1200 cr and does not want to share the valuation methodologies adopted.
    This merger is not in the interest of small shareholders. A detailed note is mentioned below

    Alembic Glass is a 50 year old company and probably the only one in the organized glassware market.
    A few decades ago the company operated a factory in Bangalore which it moved to Vadodra.
    As you know due to escalation in land prices, the factory land on Whitefield Road has now become a goldmine and attracts premium for 2 key reasons

    1. Proximity to the upcoming International Airport
    2. Large parcels of land are not available in Bangalore

    Table 1

    Approximate area in acres*


    Approximate price per acre in cr


    Roughly realization in cr


    Outstanding equity shares in lakhs


    Value embedded per share


    Current Share price




    Instrinsic value as a multiple of CMP


    * Address of land : Whitefield Main Road, Opposite Kadugodi Police Station, Mahadev Pura, Banglore - 500048.

    The above value ignores

    1. The valuation of a business that generates positive cash flows
    2. The land parcel in Vadodara

    The promoter wants it all ...

    Instead of taking actions so as to unlock the value,
    promoters want to merge the company with a privately owned company

    Promoters know the above math, in Table 1 better than anyone else.
    Promoters own 71% of the company and should rightly be sharing the above wealth with the balance 29% public shareholders.
    However the promoters don't think this is such a good idea and are adopting a strategy to cheat small unprotected shareholders.

    Step # 1 : Get a privately held company to be valued at many times its true intrinsic value
    Step # 2 : Merge this company into the listed AAG
    Step # 3 : Threaten small shareholders with delisting

    Step # 1 : Get a privately held company to be valued at multiple times its true intrinsic value

    The company is merging an obscure privately held company by the name Shreno Limited.
    This company with a turnover of Rs 13 cr, operating loss of Rs 22 lakhs and Reserves of Rs 3 cr

    Table 2

    Existing Shares o/s


    New shares issued to Shreno


    Value embedded per share


    Valuation of the company Rs cr


    The company claims this was done by "independent valuers" and refuses to share the report with shareholders.
    How can a company that reports a loss of Rs 22 lakhs on sales of Rs 13 cr be valued at Rs 2618 cr ?

    This is unfair to small minority shareholders.

    Step # 2 : Merge this company into the listed AAG
    This move increases the promoter's holding in AAG from 71.41% to 89.77%

    Step # 3 : Threaten small shareholders with delisting

    On the liability side, the company does have a case pending with ONGC.
    The case relates to some payments relating to gas supplied f or the period from 1.4.1979 to 29.01.1987 is under dispute.
    The company has already provided this amount of Rs.811.99 Lacs in it's books.
    The matter is still sub-judice and pending before the court.
    The management is using this so called liability of around Rs 20-30 cr as a excuse to merge a company that is worthless.
    Shreno brings no value and is a mere "shell" company used to increase promoter holding.

    Post de-listing, the promoters want to sell the land and benefit themselves.

    Allowing one company to get away will open the floodgates for other promoters to do the same.
    Authorities need to set examples so that such day light robberies resulting in looting small shareholders is not attempted, leave alone being successful

    Investing in capital markets as small shareholders is basically a matter of trust.
    Trust at two levels. One, trust in the company management to increase the value of the company and two, that the system that will facilitate a profit on the investment through public markets.
    If corporates get away with such cheating, the basic belief in the capitalism process is being questioned and shareholders are increasingly being looked upon as "helpless and harmless" participants.
    This threatens the integrity of the capital markets itself.

    Typically, Indian companies have high promoter shareholding.
    Most of the resolutions in AGM's go through since the vote of small shareholders hardly matters.
    This in turn means that mostly all cases, minority shareholders are at the mercy of promoters who own majority stakes in their companies.
    Where do unprotected shareholders go ?

    Request you to kindly spread this awareness among investors

    Corporate biggies warm up to carbon credit trade

    THE carbon credit trade is entering the big league, with large Indian business houses jumping onto the bandwagon. After small- and mid-sized companies, it's now the turn of the Birlas and the Ambanis to explore options of cashing in on efficient production technologies to boost profitability, as polluting foreign companies rush to meet international deadlines starting next year. The trend could witness the entry of India's Exim Bank as a key player in facilitating trading in carbon credits.

    India is considered one of the largest beneficiaries in carbon credit trade, accounting for about bn, or 31%, of the total world carbon trade through the Clean Development Mechanism. In what could be the first such public disclosure, a senior Aditya Birla group executive said Grasim Industries is talking to various international companies, while a Reliance Industries official privately admitted that India's largest private refiner and petrochemicals maker is negotiating with European firms to explore ways of selling credits earned through tight emission controls. Carbon credits are certificates issued to companies that reduce their greenhouse gas emissions. These credits are then sold to companies who cannot fulfil the protocol norms.

    "We're talking to several companies and are close to striking a deal soon," Grasim director DD Rathi told ET, without elaborating on the financial size. Of late, there has been some hectic activity seen on this front. Chemical firm SRF has already sold 2.5m units of carbon credits to two European agencies for Rs 250 crore. Recently, refrigerant maker and mid-sized company Gujarat Fluorochemicals said it expects revenue of about Rs 500 crore over the next 6-7 years through the sale of carbon credits. News of the carbon credit sale lifted the stock of the company by 19% last month, at a time when the broader sensex grew by only 8%.

    According to a Reliance Industries official, the company sees "potential growth in this space and is currently talking to a European company". But there were no financial details. A Reliance Industries spokesperson declined to comment.
    It's estimated that 60-70% of emission is through fuel combustion in industries such as cement, steel, textiles and fertilisers. Some gases like hydrofluorocarbons, methane and nitrous oxide are released as by-products of industrial processes which affect the ozone layer. Cement maker Gujarat Ambuja and fertiliser major Tata Chemicals are also learnt to be studying options in this space. One credit is equal to one tonne of carbon dioxide in the international carbon credit market. Carbon credit units are currently trading at -20 per unit.

    Apart from manufacturing companies, Indian financial institutions are also taking a plunge here. A senior Exim Bank executive said the bank had approached the ministry of environment and forests for permission as a nodal player in enabling carbon credit trades.
    Apart from the European sale, SRF, the first mover, has put another 8m tonnes of greenhouse gas credits up for sale. The firm has appointed EDF Trading of France, Barclays Capital, Climate Change Capital Carbon Fund, ICE Cap (UK), KFW (Germany), Shell Trading and Solvey as partners for the project. SRF has also struck deals with Dutch/Shell and ICECAP to sell 5,00,000 carbon credits each.

    The Kyoto Protocol that aims to reduce greenhouse gas emission by 5.2%, to below 1990 levels by '12, is a voluntary treaty signed by some 141 countries, including the European Union, Japan and Canada. However, the US, which accounts for one-third of the total greenhouse gas emission, is yet to sign the treaty. The penalty for non-compliance in the first phase is E40 per tonne of carbon dioxide equivalent. In the second phase, the penalty will be hiked to E100 per tonne of CO2.

    Developed countries have to spend nearly 0-500 for every tonne reduction in carbon dioxide, as against -25 by developing countries. In countries such as India, greenhouse gas emission is much below the target fixed by the Kyoto Protocol and hence, excluded from reduction norms of emission. On the contrary, they are entitled to sell surplus credits to developed countries.

    As of April 8, '06, actually certified emissions for Indian companies added up to 7.6m tonnes of carbon dioxide equivalent a year. Of these, 3.8 MT was by SRF, whose project was formally cleared on December 24, '05, and another 3 MT by Gujarat Fluorochemicals, on March 8, '05. Asia and Latin America are other key sellers of carbon credit in the international market. India, Brazil and Chile together account for 58% of carbon credit. India is the largest producer of carbon credit and highest in country ratings.

    Monday, September 04, 2006

    Orkut: India Stock Market - Usage Guidelines

    Hello Friends

    Here a few set of ideas which would help maintain the level of discussions in this community.

    We would have several benefits from this.
    >More focused discussions.
    >Reduction in num of new threads starting which donot have much information in it.

    >All short term queries and tips in just 2 thread.
    Makes much more sense than having them scattered around.

    >People are free to open new thread to "discus" issues.
    >before opening a new thread kindly spend a few seconds to check if a similar discussion is already going on in some thread.

    Your views welcome.

    Saturday, September 02, 2006

    >FIIs tighten grip on derivatives

    The influence of FIIs on the Indian equity cash market is well known. Now, slowly but steadily, their domination is on the rise in the derivatives segment too. FIIs’ contribution to the total turnover in the index futures market has gone up to nearly 45%.

    On fewer, but important trading sessions — such as periods before and after the triple witching day — FII activity goes up to almost 80%. This shows the dominance of FIIs when it comes to ‘make or break’ occasions. Triple witching day — the last trading Thursday of a month — is a trading session when a particular month’s futures and options contracts expire.

    The trends are important as positions in the index futures chart the course of the market for the derivative month. FIIs dominance in the derivatives market is so overwhelming that an earlier ET Intelligence Group study showed that on more than 90% of the occasions the markets moved in line with FII positions.

    In other words, if FIIs are net buyers in the first few days, the benchmark indices will end positive for the month and if they were net sellers, the market would end negative during the derivative month. A derivative month is different from a calendar month.

    It starts after the last Thursday of a given month and ends on the following month’s last Thursday. Hence, a derivative month could be longer or shorter than 30 calendar days. The FII impact is calculated by comparing FIIs’ turnover in the F&O segment with the total turnover of the F&O market on the National Stock Exchange. The F&O segment is virtually non-existent on the BSE. As such, it does not affect the calculations.

    Compared to index futures, the FII marketshare in the overall derivatives segment is around 35% on an average. But this figure does not paint a true picture. This is because FIIs, the world over, are more active in index futures and not stock futures. Stock futures are only dominant in the Indian market. The world over, single stock futures are a no-show or a low-volume business. Naturally, therefore, they are not on the FII radar.

    Dealers tracking the market said in India, FIIs trade in single stock futures mainly to hedge their corresponding position in the cash market. They rarely take a directional view in the stock futures market. In other words, they do not buy or sell stock futures in anticipation of the stock rising or falling.

    Stock futures are a hit with the domestic players, who use it mainly for taking directional calls. The options market, on the other hand, hardly figures in the overall F&O game.

    Revealing figures

    Month Average FII turnover to total turnover in index futures (in %):
    Aug (only pre-triple witching) 52.18,
    Jul 54.69,
    Jun 51.16,
    May 54.43,
    Apr 45.88,
    Mar 25.65,
    Feb 30.39
    Jan 28.2.

    If you like this you may also like to read>>
    1. [-Eagle Formula to Analyze FII fund flow-]

    2. Daily FII and MF trade data

    >Value Investing

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