Saturday, October 25, 2008

Debt equity ratios

The plan now has to be a judicious mix of equity and debt in one's portfolio, plus a good element of real estate if not already there. You have to insure against capital erosion and give yourself a steady income with some element of debt in your portfolio. Bank FDs are offering 10+% now and FMPs are around the same, though with the potential for tax savings. However, FMPs carry some risk these days since you dont know the quality of corporate debt, but what doesnt carry risk :P

For the equity component, fresh investments have to be staggered over the next few months among Nifty Bees ETF and frontline stocks like L&T, NTPC, ITC, RIL, SBI, HDFC Bank, Bharti and maybe Jaiprakash.

At any given time, ensure that six months' salary is in Bank FD for emergency usage or if you get fired :-)

Wednesday, October 8, 2008

Benchmark Nifty BeES

With equity markets tumbling, one of the best and probably also one of the safest things to buy in stock market today is Nifty BeES. This is an exchange-traded fund (ETF) by Benchmark MF. It tracks the Nifty. No fund managerial risk involved here since ETFs are passively-managed funds, and the least tracking error amongst all ETFs / index funds. It also comes from the house of Benchmark MF- a MF that managed and specialises only in ETFs. Cost structure is also low here. 

This is a long-term product, so avoid it if you have a time horizon for a year or so. But if you're in for a long haul, Nifty BeES provides an excellent opportunity.

Sunday, October 5, 2008

Where is the Market heading

You can never time the bottom. The market is a few steps ahead than us. No body expected the downfall of the Investment banks of the stature of Lehman Brothers, Merril Lynch,WAMU,AIG ,Morgan Stanley and so on. They are institutions built over a period of several decades. The worst seems to be over. The latest bank in the casualty list is Wachovia bank. The Financial turmoil has an impact in the world market. The Funds have dried up and the cost of capital has shot up. The banks are extremely scary to lend. They have invoked the Bank guarantees and Stand by letter of credit issued by various US banks. The banks have also freezed the drawing power limits to various company's. This will certainly impact the performance of the various corporates. The YOY growth in EPS and Profits during the current year will be lot lower. The average Corporate growth should be in the range of about 15%. The inflation and higher interest rate will definitely have an impact on the corporate results.The Stock market seems to have factored this in the price correction. The Forward PE's based on trailing quarters will definitely be a lot lower. The Economic indicators still looks fine inspite of the fact that the Trade deficit has widened. The focus on infrastructure and Power projects looks really encouraging. Anything to do with power and infrastructure should do well.
My advice for investors with strong heart will be :Pick stocks with a longer time horizon.
Invest in diversified portfolio.
ETF(Exchange Traded funds) seems like a good bet. Invest in Gold funds on a monthly basis with a time horizon of a minimum period of 5 years.
FMP's(I am not a fan of it). The funds normally invests in un-secured papers and the returns are not so great. Mutual fund investments is lot preferred than FMP's. However, the nature of your investment will be purely based on your risk appetite.
Investment in Land also seems like an attactive proposition. However the liquidity is not so great. Investment in land can be looked into with a time horizon of 3+ years. Any land investment over a period of 3 years qualify under long term capital gains.

Personally, I am big fan of Stock market. The market will do good in long run and you can earn high returns only in Stock market. Picking diversified stock meticulously will never let you down.Do your own stock picking rather than relying on Mutual funds.

Blue chip stocks which can be considered investing into:

Tata Steel : The stock has fallen below 400
Tata motors: Can correct to 300 level. Good long term pick. Hold for a minimum period of 2 years where the company will start reeping benefits out of its overseas acquistions.
Sesa Goa
Seimens Ltd
Reliance Industries
IT stocks (Infosys,TCS and Wipro)
Tata Power
Godrej industries(Good chemical stock and land bank)
United Phosporous.
Dabur and Marico industries(FMCG company's) available at a song....

Disclaimer: These are recommendations based on my personal research. However, please exercise your reasonable deligence before your decide to invest.