Thursday, March 29, 2012

I am going to increase the price of the Paid Service, from 1st May, 2012 and hence those who want to enroll should do it before the stipulated time. 
Select bank stocks should be bought, while some fools are selling all the bank counters---really Indian investors, needs to be educated in investing principles and techniques. Most of them are dumb and some invest through tips coming from television channels and advisory services; which is dangerous. When one is investing in a company he should take into account at least two things: the individual performance of the company and the conditions of the sector. If a bank is performing well, inspite of its sector not doing well, then that counter should be bought into and then held with patience for the improvement in the sector performance. Banks are a proxy of Indian economy, so if the Indian economy is to grow, the banks must play a crucial role. An efficient banking system caters to the needs of high-end investors by making available high amounts of capital for big projects in the industrial, infrastructure and service sectors and thus driving country's growth. Also, a repo rate and a CRR Cut is on the cards to at least support the rural sector. Rural sector in a country like India can grow only if cheaper credit is available to the farmers for their short and medium term needs. Moreover, if we think of the real estate sector then the price of apartments in Mumbai and elsewhere are shooting over the roof, because of the government's motivated (feudal) decision to keep the rates abnormally high. As soon as the interest rates come down, I think, the price of apartments and most of the commodities would come down, because the cost of funds would come down; though it would take sometime to increase the off-take. Also, some of the bank stocks are cheap by almost every metric as many of them are more than 20-25% away from the 52-week high price. Moreover, the price-to-earnings ratios (P/E) and price-to-book ratios (P/BV) are at crazy levels for some as compared to some of their Indian/US peers. For example, please take the case of IFCI Ltd whose P/E is around 4.32 as compared to SBIs P/E of 17.21 (but then the P/E of SBI is expected to decrease post infusion of funds by the GOI). This is also much lower against the P/E of Nifty. But here is a caveat: the valuation metrics like P/E and P/BV are best compared within a sector to avoid an apples-to-oranges comparison. Besides, this IFCI Ltd is a massive company, which has interest in many sectors, so it should not be only considered as a lending counter, but on the contrary it should be guaged holistically. I have already placed a report on IFCI Ltd on 23rd March, 2012-you can go through the same. CLICK HERE. Therefore, buy select bank stocks, not all.
Yesterday, the  Mini_Nifty shot up from 5175 to 5204 after it was recommended a buy to the Paid  Service members. I think most of them made money in this call. You can check, the details of the Nifty call in the Free Group: SumanSpeaks:
Dish TV Ltd was again recommended a buy at Rs.59-60, for a target of Rs.67-70, after my long discussion with some of the heads of research of some well known brokerage houses. The scrip has probably completed its correction is now poised to move towards, Rs.70, in the coming days. Last month there were media reports that the direct to home (DTH) service provider Dish TV India Ltd is focusing on new customer acquisition, high definition technology and digitization to strengthen its position in the highly competitive DTH market. In December last year a bill has been passed that mandates complete digitization of cable TV across the country by December 2014. As a part of its product portfolio expansion, the company has already launched a new high definition (HD) digital video recorder -- The Dish truHD+-- that will be sold to consumers at Rs.2,690. Dish TV is also offering a free upgrade to its consumers who already own an HD set-to-box. Those Paid Members, who took the scrip yesterday, must be benefited.
Among all the controversies, it is good to see that the UPA government has shown some courage to take a bold decision on GAAR. However, the government should do away with the silly "RETROSPECTIVE CLAUSE", to trap companies like Vodafone Ltd---this is devoid of any ethics. However, the government has already clarified that it will not target participatory notes or P-Notes in a blanket manner under its newly proposed rules targeting tax avoidance. TV reports citing unnamed finance ministry officials on Tuesday, 27 March 2012 said that the finance ministry will not be chasing after P-Notes, or derivative products that allow foreign investors to invest anonymously into Indian equities, as part of its recently proposed General Anti-Avoidance Rule (GAAR) which comes into effect from 1 April 2012. GAAR will help the tax authority deal with commercial transactions that are structured essentially to circumvent tax laws and avoid paying taxes. If the revenue authority concludes that a transaction by any entity is aimed primarily at avoiding taxes, it will be able to deny tax benefits claimed by the entity. The detailed guideline that is expected to be issued will provide some clues on how the GAAR provisions are to be applied in practice. Investments coming to India through tax havens like Mauritius could also be subject to General Anti-Avoidance Rules. A large portion of FIIs investing into India are domiciled in Mauritius. The double taxation avoidance agreement (DTAA) that India has signed with Mauritius enables tax on securities transaction to be taxed in the country where the company is resident. Since capital gains tax rate in Mauritius is zero, foreign investors buying or selling Indian stocks through the Mauritius route get away by paying no capital gains tax. I find one positive from this move, if some of the FIIs are taxed then some slippage of revenues will be saved and this will address the problems of gaping fiscal deficits. Also, how is that when the citizens of India are bound to pay capital gains tax, the FIIs coming through shell companies and having namesake offices in Mauritius escape the Indian tax net? This should not be allowed at any cost, even if FIIs take money out...this goes against the spirit of the constitution of India. It is good that at last government has taken some steps to stop this unhealthy practice and plug this gap of tax avoidance. I find this move to be neutral as long as high interest regime prevails and foreign funds pour money in Indian debt instruments. What is needed at this hour is to cut the rates, so that Indian Industry becomes competitive. But then I do not know when those at the FMO or the RBI would take this decision!! I do not understand why the government is only targeting on curtailing the demand to curb inflation, instead of addressing both the demand-supply co-ordinates. Moreover, the FMO and those sitting in the RBI and drawing fat salaries from the poor peoples tax money, should ensure that the image of the India as an investment destination is not hampered in anyway. Or else rupee would slide and it will further create complications, making the task of controlling inflation even difficult. I do not now if the deaf and dumb authorities in the Indian government are listening to me or not!! Both the RBI and the FMO has already blacked their faces in their efforts to bring a balance towards controlling inflation and growth. But then some light could be seen at the end of the tunnel, after this bold step---let us see how much this would plug India's  yawning fiscal deficit.
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