Monday, April 27, 2009
Sunday, April 26, 2009
Some english for CAT freaks.
By now all of you will surely have started slogging for the coming exam in November.Just to make it a bit easier ,i have a nice plan !As you know that english is a major part of the exam,we can start developing our english together on this blog.We can start quizzing on tough words through comments and also share some good CAT questions with each other.But we must insure that we carry this out regularly in order to obtain maximum benefits.This sort of learning will prove to be interesting as from now on we will not have to slog with huge word lists which become really monotonous after some time.
***BEST OF LUCK***
***BEST OF LUCK***
Saturday, April 25, 2009
How to calculate the value of an index on a particular day??
We often say things like -"The SENSEX opened at 15000 points",though not in today's bear market!The question is-"How to calculate the value of Sensex,Nifty or any other index on a particular day"??
For this you need to know about market capitalization.Market capitalization is a factor which determines the vastness of a company.It is the product of the total number of shares which are out and the current share price of that company.
For eg RIL,had a market-cap of about Rs 200000 crore,which is a big amount.Basically it is that amount,which one will have to spend in order to purchase all the shares of a company.
After the market-cap,we have something called asthe index factor.The index factor remains constant at a particular time for each index.Like Sensex will have a different index factor than Nifty.
After you get the market cap of all the companies listed in a particular index,simply add them up.Divide that value by the index factor.Now you have the value of that index right in front of you!
For this you need to know about market capitalization.Market capitalization is a factor which determines the vastness of a company.It is the product of the total number of shares which are out and the current share price of that company.
For eg RIL,had a market-cap of about Rs 200000 crore,which is a big amount.Basically it is that amount,which one will have to spend in order to purchase all the shares of a company.
After the market-cap,we have something called asthe index factor.The index factor remains constant at a particular time for each index.Like Sensex will have a different index factor than Nifty.
After you get the market cap of all the companies listed in a particular index,simply add them up.Divide that value by the index factor.Now you have the value of that index right in front of you!
Are the rate cuts really low?
With the FY 10, monetary policy being already announced by RBI governor D.Subbarao a few days ago all eyes are now on financial service players as to how they respond to the signals clearly given by Guv.
RBI has never been so quick to react to the situation and be proactive...but in past 7-8 months it has reacted in symphony with the situations and has reduced the key interest ratios by substantial margins viz. CRR,RR,RRR. As a consequence the onus now is on bankers to take the cues and reduce interest rates as also deposit rates and this is precisely what Mr. Subbarao clearly hinted at during the recent Monetary Police announcement.
Though the absolute interest rates have been reduced by the bankers in range of 75 bps to 2 bps by few players(notably the PSU majors like SBI,PNB). But most of private sectors have been reluctant to prune down the rates.
But if one goes by Actual interest rate figures (Interest rates - Inflation) then the interest rates are still on higher side.The bankers argue by saying that the cost of money is still high and they have to maintain their NIM's(Net interest Margins).Another argument is that those people who have taken Fixed deposits will continue earning same interest rates till expiry but the loan takers will have to pay less everytime the interest rates and PLR's are reduced by banks.So while they have to keep paying same interest rates to the lenders they will be able to earn less interest from borrowers.
Also seeing the environment and what has happened in past year or so has made bankers cautious in extending the credit to people.Though India has been relatively insulated from the lending crisis but still if NPA's rise then again the bankers would be taken by sticks as no body knows who might go bust the next day. Even biggest of corporates have openly admitted of the tight credit situation.
Though the situation is expected to improve with all the rate cuts playing their way through the economy in coming days.
What do you think?? Are we moving towards ZIRP regime???
RBI has never been so quick to react to the situation and be proactive...but in past 7-8 months it has reacted in symphony with the situations and has reduced the key interest ratios by substantial margins viz. CRR,RR,RRR. As a consequence the onus now is on bankers to take the cues and reduce interest rates as also deposit rates and this is precisely what Mr. Subbarao clearly hinted at during the recent Monetary Police announcement.
Though the absolute interest rates have been reduced by the bankers in range of 75 bps to 2 bps by few players(notably the PSU majors like SBI,PNB). But most of private sectors have been reluctant to prune down the rates.
But if one goes by Actual interest rate figures (Interest rates - Inflation) then the interest rates are still on higher side.The bankers argue by saying that the cost of money is still high and they have to maintain their NIM's(Net interest Margins).Another argument is that those people who have taken Fixed deposits will continue earning same interest rates till expiry but the loan takers will have to pay less everytime the interest rates and PLR's are reduced by banks.So while they have to keep paying same interest rates to the lenders they will be able to earn less interest from borrowers.
Also seeing the environment and what has happened in past year or so has made bankers cautious in extending the credit to people.Though India has been relatively insulated from the lending crisis but still if NPA's rise then again the bankers would be taken by sticks as no body knows who might go bust the next day. Even biggest of corporates have openly admitted of the tight credit situation.
Though the situation is expected to improve with all the rate cuts playing their way through the economy in coming days.
What do you think?? Are we moving towards ZIRP regime???
Fundas of Dividend!!!
Dividend,It is just like a "BANDAGE" when markets are bleeding red.
Thats how i see a dividend cheque of a company which has consistent yields and dividend policy.What better than a cheque when everything is going down.It is at this very moment one feels the importance of Dividend paying stocks in Portfolio.
Dividend is a share of profit which company distributes among its share holders. It is done to reward the shareholders for their investments, good will and also to keep shareholders intact. Sometimes special dividends are given like Silver jubilee, extraordinary performance etc.
Dividend yield is obtained by dividing the value of dividend received, in rupees by the Current Market price of the stock.
In India the picture of giving dividends has not been too encouraging as compared to counterparts in emerging economies like China, Hong kong and developed economies like US.There is hardly any NIFTY company which has a dividend yield of around 5%.Tata Motors is one of the good dividend paying companies in Nifty( 4%), HCL Tech., Ambuja Cements etc.
In midcaps the name include Varun shipping , HCL infosystems, BRPL, vijaya Bank, Wockhardt, Castrol, Syndicate Bank.
But one should not only buy dividend paying stocks just because they pay dividends, as sometimes in tough conditions it becomes impossible for a company which does not have sound fundamentals to keep distributing Dividend cheques year after year.So investment decisions should be based on a mix of company performance, profits, dividends, nature of business, sector etc.
An article i read in ET provided the statistical side of benefits of Dividend which can take care of retirement life in a respectable manner::
The portfolio comprised of around 20 stocks across diversified sectors like defensives, cyclical stock with proven track record of past 10 years in paying dividends with equal weightage to each stock.
The calculations have been done from 2002-2003 bear markets when dividend yields improved due to falling Stock prices.( denominator reduces) so it is better to invest in bear markets.
Rupees 30000 invested in 1994 would have given 4300 Rupees till 2008.
But if you have invested since 2002( prior to 03 bear market) the dividend by 2008 would have been around 15000 !See it is almost 3 times the previous case.This has happened as Dividend receipts have jumped in past years .In fact it is even more than capital appreciation in few cases.
For the portfolio selected the dividend CAGR was around 21%.I would say NOT BAD!
But now lets see what happens if the dividends are reinvested for 20 years in a deposit like PPF ( 8% p.a)-
The scale of investment we are taking here is Rupees 200000( 2 lacs). It seems big but what comes out would be even bigger!
Suppose the dividend receipts continue to grow at same rate of 21%, in the first year the payout if around 7000,the yield works out to be around 3.5%,But over 20 years at same rate of growth it works out to be Rupees 3.2 lacs.
But wait,be prepared for the dividend magic along with PPF.
Over 20 years at PPF's rate of 8% investment this net investment of Dividends reinvested in PPF works out to be Rupees 25 Lacs.Whopping 25 lacs in fact!!!
Seeing this figure could make one even forget that this is the Dividend income and it is over and above the capital returns.
This is all for investment benifits,other benefits like TAX FREE INCOME ( both PPF and dividends)are also other lagniappe's.
So this is the time to take note of good dividend paying stocks, see the history and start planning.Equities should not be looked down upon only as trader instruments.
Thats how i see a dividend cheque of a company which has consistent yields and dividend policy.What better than a cheque when everything is going down.It is at this very moment one feels the importance of Dividend paying stocks in Portfolio.
Dividend is a share of profit which company distributes among its share holders. It is done to reward the shareholders for their investments, good will and also to keep shareholders intact. Sometimes special dividends are given like Silver jubilee, extraordinary performance etc.
Dividend yield is obtained by dividing the value of dividend received, in rupees by the Current Market price of the stock.
In India the picture of giving dividends has not been too encouraging as compared to counterparts in emerging economies like China, Hong kong and developed economies like US.There is hardly any NIFTY company which has a dividend yield of around 5%.Tata Motors is one of the good dividend paying companies in Nifty( 4%), HCL Tech., Ambuja Cements etc.
In midcaps the name include Varun shipping , HCL infosystems, BRPL, vijaya Bank, Wockhardt, Castrol, Syndicate Bank.
But one should not only buy dividend paying stocks just because they pay dividends, as sometimes in tough conditions it becomes impossible for a company which does not have sound fundamentals to keep distributing Dividend cheques year after year.So investment decisions should be based on a mix of company performance, profits, dividends, nature of business, sector etc.
An article i read in ET provided the statistical side of benefits of Dividend which can take care of retirement life in a respectable manner::
The portfolio comprised of around 20 stocks across diversified sectors like defensives, cyclical stock with proven track record of past 10 years in paying dividends with equal weightage to each stock.
The calculations have been done from 2002-2003 bear markets when dividend yields improved due to falling Stock prices.( denominator reduces) so it is better to invest in bear markets.
Rupees 30000 invested in 1994 would have given 4300 Rupees till 2008.
But if you have invested since 2002( prior to 03 bear market) the dividend by 2008 would have been around 15000 !See it is almost 3 times the previous case.This has happened as Dividend receipts have jumped in past years .In fact it is even more than capital appreciation in few cases.
For the portfolio selected the dividend CAGR was around 21%.I would say NOT BAD!
But now lets see what happens if the dividends are reinvested for 20 years in a deposit like PPF ( 8% p.a)-
The scale of investment we are taking here is Rupees 200000( 2 lacs). It seems big but what comes out would be even bigger!
Suppose the dividend receipts continue to grow at same rate of 21%, in the first year the payout if around 7000,the yield works out to be around 3.5%,But over 20 years at same rate of growth it works out to be Rupees 3.2 lacs.
But wait,be prepared for the dividend magic along with PPF.
Over 20 years at PPF's rate of 8% investment this net investment of Dividends reinvested in PPF works out to be Rupees 25 Lacs.Whopping 25 lacs in fact!!!
Seeing this figure could make one even forget that this is the Dividend income and it is over and above the capital returns.
This is all for investment benifits,other benefits like TAX FREE INCOME ( both PPF and dividends)are also other lagniappe's.
So this is the time to take note of good dividend paying stocks, see the history and start planning.Equities should not be looked down upon only as trader instruments.
Friday, April 24, 2009
Thursday, April 23, 2009
Young entrepreneurs to lead the change!
After all the hardwork done by our worn out politicians to make India into a corruption hub,now it is the turn of the educated young entrepreneurs to change the system and make India a much better place to live in.One such example is Sarath Babu,a slum kid who made it to IIM-A and started his own catering services.This 31 year bloke runs Rs 7-crore Food King in Chennai.Babu is now going to set his foot in the so called "gutter" of politics with the slogan"Let's change now".He is going to stand from the South Chennai constituency as an independent candidate to Lok Sabha.
Similarly Capt Gopinath is contesting from the Bangalore South constituency.According to him an entrepreneur can change the world in politics too.
Similarly Umendra Bharat an IIT Kanpur Graduate has filed his nomination from the Kanpur -4 contituency.
If such elite citizens get to govern us,then it may turn out to be a boon for the entire country.Now it is for us to wait and watch the coming of an Indian Osama ohh sorry....I meant Obama!!
Similarly Capt Gopinath is contesting from the Bangalore South constituency.According to him an entrepreneur can change the world in politics too.
Similarly Umendra Bharat an IIT Kanpur Graduate has filed his nomination from the Kanpur -4 contituency.
If such elite citizens get to govern us,then it may turn out to be a boon for the entire country.Now it is for us to wait and watch the coming of an Indian Osama ohh sorry....I meant Obama!!
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