People at Work & Play

Reflecting the turmoil in the stock markets world wide, two recent IPOs in India had to be hastily withdrawn. The companies affected were Wockhardt, the healthcare provider and the realty developer, Emaar MGF.

The global turbulence in the IPO market saw as many as 10 US companies withdraw their IPOs so far in 2008. In Europe too the renowned fashion brand Tommy Hilfiger had to withdraw a two billion dollar floatation.

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The stock market has been the talk of the town for the last few months. The Sensex shot past the 20000 mark and every man and his neighbour wanted to make a killing in the stock market. In such a context, I found an article in the Economic Times very useful.

As they say, the first rule to investing is ‘Don’t lose money’. The second rule to investing is ‘Don’t forget rule no. 1’! It is essential to stick to these rules when it comes to investing, in order to avoid the possibility of capital erosion.

To apply these rules successfully and to create wealth through equity investing, Raamdeo Agrawal, Director & Co-founder, Motilal Oswal Financial Services identifies a 5-step guide to locating a ‘wealth creator’ , Here are the 5 parameters that you must evaluate:-

1. Assess the entry barriers created by a company
2. Management should be competent and passionate
3. Management should have integrity
4. Buy low
5. Have patience

Read the article to understand why these tips can make you a wise and successful investor.

In an era of fast cash, people go around with an array of credit cards. Some flaunt a fistful of cards arranged like a sheaf from a pack of playing cards.

Does your spending increase due to credit cards? The thinking seems to suggest so. Shop keepers actually dislike credit cards because they eat into their margins but are pretty much compelled to accepts them-simply because other shopkeepers do. Competition is the name of the game.

MyIris gives some tips on using your credit card. So too does Deutsche Bank.

If you use them sensibly, credit cards are a boon. As we would say in India “Credit Card, Zindabad!” (Long Live, Credit Card)

In an era of fast cash, people go around with an array of credit cards. Some flaunt a fistful of cards arranged like a sheaf from a pack of playing cards.

Does your spending increase due to credit cards? The thinking seems to suggest so. Shop keepers actually dislike credit cards because they eat into their margins but are pretty much compelled to accepts them-simply because other shopkeepers do. Competition is the name of the game.

MyIris gives some tips on using your credit card. So too does Deutsche Bank.

If you use them sensibly, credit cards are a boon. As we would say in India “Credit Card, Zindabad!” (Long Live, Credit Card)

The Sensex is a barometer of feelings about the economy. It is the name the man in the street knows for the Bombay Stock Exchange Sensitive Index.

Yesterday history was created in India with the Sensex closing at a high of 18,280 - up 789 points. For perspective, the Sensex was at 3390 on January 1, 2003, rose to 5000 in November 2003, reached 10,000 in February 2006, 15,000 in July 2007 and now up to 18,000.

The news that drove such an increase yesterday is attributed by many to indications of political stability with a patch up between the UPA and the Left- even if temporary. The market seems to have shrugged off the political worries with the Left and Congress deciding to take up the Indo-US nuclear deal issue after the festive celebration of Dussehra on Oct 22.

Fortunes, I am sure, were made or lost in the last few days. Invest carefully is my advice.

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February”- Mark Twain.

One of the drivers of the tech driven boom in India has been the earnings of Indian IT professionals while on assignments abroad.

India’s IT employees will have to pay tax on earnings from overseas assignments as per the Authority of Advance Rulings (AAR). A report in the Times of India quotes AAR as saying that there is no escape from paying tax on amounts earned during stints abroad with the employer’s foreign affiliates.

The gist of the ruling in the case of an Infosys employee is that tax on income earned during the deputation abroad has to be paid either in India or in the country in which the deputed employee was working.

IT ( Income Tax not Information Technology in this case!) officials said;”If the company is subject to Indian tax laws, the employee will have to pay taxes in India even if the income was earned overseas and the manager has claimed NRI (non-resident Indian) status by virtue of having spent the stipulated number of days outside the country.”

Quality education was and will always remain expensive. In recent years, education has become a big item in the expenditure basket. Primarily due to the huge increases in real estate, it has become much more expensive to establish and administer schools, especially in the big cities. The unbridled increase in school fees even led to the intervention of India’s Supreme Court which decreed a cap in school fees.

In this context, The Economic Times estimates that it would cost an average of Rs. 21 lakhs - at today’s prices- to educate a child through school till college.

Modern banking is very convenient with internet banking, ATMs etc having changed the way we bank. However, there have been innumerable cases of people being cheated - sometimes due to their own carelessness or oversight.

Both tourists to India as well as many Indian themselves have been hapless victims who found huge amounts siphoned off from their bank accounts.

ICICI Bank, one of India’s leading banks has published a list of Safe Banking Tips which is well worth the few minutes it takes to read this.

After all it is better to be safe than sorry!

Came across an interesting article by Clifford Alvares in “Business Today” which desribes the Risk-Reward Spectrum.

• The least risk and least returns comes from cash
• A little higher risk with better returns are Government savings instuments like PPF, NSC, RBI tax bonds -which get locked in @ 8%
• More rewards-with higher risks-come through Debt mutual funds which give returns of 8-9%
• Real estate property, gold and precious metals come next with steady returns often beating inflation
• Higher in risks- and higher in returns- are equity mutual funds
• Highest in risk but with highest returns possible are direct equity investments.

At the end of the day, you need to take a balanced approach based on your own risk taking capability.

Every one wants to make a quick buck in an IPO ( Initial Public Offer). A young couple told me recently that they had planned investments anticipating a killing through investments made in a spate of IPOs. Their youthful exuberance led them to believe that they had a sure shot approach to almost instant financial success.

Yes, a Tech Mahindra gave you a 307 % increase climbing to Rs. 1483 on March 23, 2007 against IPO of Rs. 365. But all stocks don’t have such attractive returns.

Business Today has “Six Questions To Ask Before You Take The IPO Plunge”:

• Are the promoters known and genuine? Check out past records, promises and performances, and criminal proceedings against them
• What is the reason for the IPO? Is the promoter cashing out, or is the business in growth stage and needs to expand? Is the sector growing? The company should operate in an industry that’s growing at a decent clip or has the potential to grow
• Where does the company stand? Do a comparison check with its industry peers. Take an in-depth look at the financials, balance sheets, profit and loss, industry growth, products and compare with the big and strong players in the segment
• How is it valued? Valuations should be fair and profit visibility should be near-term. It should not account for profits that are two-to-three years down the line. Ideally, it should be valued lower than similar-sized companies
• Is the business scalable? The company’s business should have the ability to grow in size over time, both organically and inorganically

Ask these questions and then take the plunge. Otherwise, your plunge may, over a period of time, cause you more grief than joy.