SANDY TECHFANATIC

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Several new concepts of investments have found their way to the Indian market with the introduction of new mutual fund schemes. At a time when interest in MFs might seem low, it is interesting to note several additional investment options being created. Investors must examine the details of such concepts carefully, to help achieve their investment objectives in a simple manner. Here are some themes and concepts and how an investor can effectively make use of these.

BOOKING GAINS

Buying a fund is just one part of the transaction. To make profits, there has to be a sale of the units. Often investors keep holding the units without booking any profits and in course of time are unable to realise the gains.

This happens because markets move both up and down and this can result in a situation where the investor's profits remain just on paper. One way out is to have predetermined levels at which profits will be booked. The problem is actual implementation.

The investor has to constantly monitor if the target has been reached and then has to sell. This process can be automated by giving the MF instructions to sell at a particular level. This facility is also known as a trigger. This is not available with all funds, but when present can be implemented in two ways.

A simple implementation can result in the units being redeemed by the fund. This means if you have invested Rs 10,000 in a fund at Rs 10 and given instructions to redeem these at a 20 per cent profit, then when the net asset value (NAV) reached Rs 12 this will be done and you will get Rs 12,000.

The second route is to transfer the gains or the entire investment to a debt fund. In such a situation relating to the gains, the extra Rs 2,000 earned will be transferred from the equity to a debt fund, where the risk is less. The ICICI [Get Quote] Prudential Target Returns Fund is an example of this type of scheme, where the investor can set trigger levels at 12 per cent, 20 per cent, 50 per cent and 100 per cent. The gains or the entire investment can be transferred to one of the pre-determined debt schemes of the same fund house.

SUITABILITY

Such schemes and options are suitable for investors who do not have any time to monitor their investments regularly, but would not like to miss an earning opportunity.

It is also useful for those who want to balance their investments without relying too much on human decisions at regular intervals. The investment base is an equity fund, so the investor should consider the scheme's performance and, if suitable, use it as a part of their equity exposure, ideally restricted to 10-12 per cent of the portfolio.

QUANTITATIVE FACTORS

There are different ways to take an investment decision. The traditional route is to have a fund manager who will make all the decisions on purchase and sale of shares in the fund.

Another way is through the route of automatic decisions when certain conditions are reached. One option here involves the use of mathematical models for selecting stocks in the portfolio. This eliminates the human element in decision making, along with any bias, as the model throws up all the decisions to be taken.

Two such funds available are the Religare AGILE fund and Reliance [Get Quote] Quant Plus Fund. These involve a scientific approach, whereby investment strategies are framed and then back-tested before being applied in real life situations.

SUITABILITY

These types of funds are suitable for all those investors who are comfortable with a slightly higher risk in their investments. It is useful for those investors who want to have stocks in their portfolio based on specific factors and these are included in the quant working of the scheme. Investors should ensure the exposure to such funds remains at around 7-10 per cent of the portfolio.

1. Market Capitalisation

What is it?

Market capitalisation (cap) is calculated by multiplying a company's outstanding shares (paid-up equity capital divided by the face value) with the current market price (CMP). This indicates the worth of the company in terms of its shares. To calculate the market cap of, say, GlaxoSmithKline (GSK) Consumer Health-care, multiply the CMP -- Rs 815 as on 13 May -- with the 4.20 crore (42 million) outstanding shares, which comes to Rs 3423 crore (Rs 34.23 billion).

Where to look

The financial results section or the company related page on stock exchange websites (www.nseindia.com or www.bseindia.com) give details of outstanding shares
The quotes page on these sites give CMP
Financial dailies publish market cap data of select companies

2. Trading Volumes

What is it?

It is the total number of stocks of a company traded at an exchange. It is a measure of the liquidity and also shows the level of market participation in the stock. This figure is especially important in the case of low-volume stocks (below 2,000 shares). During tough market conditions, liquidating low-volume stocks becomes difficult. The 2-week average quantity of Dabur India shares is around 2.2 lakh, which is a comfortable number. On the other hand, the number for MMTC is only 500-600 shares for the same period.

Where to look

Stock exchange sites
Financial dailies

3. Historical Price Data

What is it?

This information helps understand how a stock's price has behaved over a period of time. Information on whether a stock is at a new peak or a new low helps evaluate the quality of the stock. For instance, if a stock has breached its yearly low, you should get into the reason behind it.

Where to look

The quotes page or the stock reach page on the NSE and BSE sites share the yearly high and low data
Use the 'charting function' of exchange sites for graphical representation. This will help you find whether the stock is trading at a new low or a new high. The co-movement option helps compare the performance of the stock with the index
On www.nseindia.com, go to the equity, market information, historical data section. Click on the security-wise data section, get the security symbol and choose the dates for which you want information. On www.bseindia.com, go to the archives section

4. Company Developments

What is it?

Developments in a company such as a new product, capacity expansion or a new clientele can affect the stock's performance. Find out what impact these developments can have on the stock. Also, find out about the company's competitors, government regulations related to it, and their impact on its operations.

Where to look

Financial dailies
Corporate announcements on exchange sites have information about developments in a company
Analyst meets or conference call updates on company sites throw light on the company's future plans
To understand the operations of a company, read its latest annual report. The director's report and management discussion and analysis will give you a detailed perspective on the company's current performance and outlook
Follow the notes published at the end of the statutory advertisements that companies release to gather information on disclosures
Investors can also become a member of online investment clubs. You will derive a lot of information which can, subsequently, be validated from a reliable source

5. Financial Data

What is it?

Before buying a stock, it is important to know about the company's financial performance. Growth in sales and profit over the last four to five quarters will help you understand its performance in the light of the recent market scenario. Its growth rate in the last 4-5 years will give an insight into the pace of growth in the past. Look at the operating margin growth as well, especially so in the current tough operating environment.

Remember to look at the consolidated, and not the standalone performance. Consolidated performance includes the results of all subsidiaries, joint ventures and investments in associate companies. Its importance is evident from the impact it has on the performance of some companies.

Where to look

Company website. Results and annual reports need to be read carefully. For example, in case of Dabur India, go to www.dabur.com, click on investor relations and get into financial presentations. You will get quarterly results, annual report, investor communications and analyst conference call transcripts there
The financial results section on stock exchange websites

6. Balance Sheet

What is it?

Many companies, especially those from the pharmaceutical and IT sectors, are under stress due to high debt and losses on foreign currency borrowings. Many investors ignored the foreign currency convertible bond (FCCB) details before the 2008 stockmarket crash.

FCCB is a type of convertible bond issued in a currency different from the issuer's domestic currency. The mix of debt and equity instruments it has gives the bondholder an option to convert the bond into a stock.

Due to the sharp stockmarket dip, the companies are unable to offer the bondholders the option of converting the bonds into equity at a premium. Instead, bondholders had to exercise the debt option. Companies would now have to decide on how to service their FCCBs.

The balancesheet will also help you understand the financial leveraging capacity of the company. Calculate the debt-equity ratio to get this. It is arrived at by dividing the total liabilities by the stockholders' equity.

Take the case of Aurobindo Pharma. It has outstanding FCCB of $260 million. A part of it will come up for redemption in the beginning of 2010. This stock got butchered when the FCCB issue became a major concern and is currently trading at more than 80 per cent discount to its FCCB conversion price.

Recent updates on the NSE website suggest that the company has plans to buy back its outstanding FCCBs in small lots. The company's debt-equity ratio is 1.5. This should be considered before investing because high debt-equity (normally above one) suggests that the company has been aggressive in financing its growth through debt. If the company's operation is under stress due to the economic environment and its balancesheet is debt-burdened, then it would be better to stay away from its stock.

Where to look

Annual report and news releases on the company website
Corporate announcements available on stock exchange sites

7. Basic Calculations

Deduct any preferred stock dividends from the net profit after tax and divide the balance by the number of outstanding shares. This will give you the earnings per share (EPS) of a company.

To assess a stock, calculate the trailing 12 months' EPS (for the last four quarters). Then, calculate the price earning ratio (PE) -- CMP divided by EPS.

For example, GSK Consumer's EPS grew steadily from Rs 30 in December 2006 to Rs 51.30 in March 2009. The company follows the calendar year and this data can be sourced from the exchange sites and also the company's website, www.gsk-ch.in. The latest EPS and CMP (Rs 815) translate into a PE ratio of 15.9.

To evaluate whether a PE is high or low, compare it with the industry PE and index PE. This data is also available on exchange sites. Go to the industry index information to get the PE details of a particular industry. The BSE FMCG Index's PE, for instance, as on 13 May is 23.54 while GSK Consumer's PE is 15.9. This suggests a comparatively low PE for the company.

Where to look

Profit & loss account on exchange sites or company website
Quarterly or annual results published by the company also carry EPS information

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Bookings for Tata Motors eagerly awaited Nano, dubbed the world's cheapest car, open on Thursday.

The Nano was formally launched by Chairman Ratan Tata on March 23 and has been available for viewing in showrooms around the country from April 1, as are application forms.

The Nano made a much-trumpeted debut in January 2008 and was due to go on sale late last year, but its arrival was delayed by a dispute over the land where a purpose-built facility was to be located.

Following are some frequently asked questions.

WHAT WILL THE NANO COST?

Prices vary, but the standard Nano will cost 100,000 rupees ($1,993), ex-factory, though this is available to only 100,000 buyers who will be selected through a computer generated draw sometime between late-April and late-June. Showroom prices start from 112,735 rupees for the standard version and go up to 185,375 rupees for the luxury version.

WHAT IS THE BOOKING FEE FOR THE NANO?

For the standard version it is 95,000 rupees, rising to 120,000 rupees for the mid-segment model and 140,000 rupees for the luxury variant.

WHAT IS THE BOOKING PROCESS?

Customers can book online at www.tatanano.com and pay the booking fee there. Or they can book via forms at specified branches of State Bank of India , the country's largest lender which is managing the process, dealerships and other outlets. Customers can get financing from 18 banks and Tata Motors Finance. Booking fees for financing start from 2,850 rupees for the standard model, at interest rates ranging from 9 percent to 14.25 percent.

HOW MANY NANOS WILL TATA MAKE?

Large-scale production has been delayed by the relocation row that shifted output to Gujarat from West Bengal last year. As a stop-gap arrangement, Nanos will be rolled out from Tata's existing car factory in Pantnagar in Northern India, which has the capacity to produce 50,000 units a year.

WHEN WILL CUSTOMERS GET THEIR CARS?

Bookings close on April 25, and within 60 days Tata Motors will announce the allotment of 100,000 cars in the first phase of deliveries. These 100,000 cars will be price protected at the launch price until delivery, but the booking fee will bear no interest for the customer. Deliveries will start from July.

WHAT HAPPENS TO CUSTOMERS NOT AMONG THE INITIAL 100,000?

Applicants can rollover their booking deposit even if they aren't among the first 100,000 buyers. They will earn interest on that deposit -- from the date that a second phase allotment is announced -- at 8.5 percent to rollover the deposit for between 1 and 2 years and 8.75 percent for more than 2 years. The allotment of those keeping their deposits at Tata will be announced along with those chosen for the first 100,000 cars.

HOW BIG IS THE NANO?

The car can seat 4 people. Tata's chairman has said his inspiration for the cheap car was the common sight on Indian roads of a family of four riding a motorbike.

HOW MANY INDIANS OWN A CAR?

There are around 9 vehicles per 1,000 people, well below levels in developed countries. India's population is around 1.1 billion.



HOW MUCH DOES A 2-WHEELER (SCOOTER, BIKE) COST?

Prices of motorcycles range from 30,000 rupees at the low end to 1.2 million rupees at the higher-end. Tata has said the Nano aims to give people the chance to shift from a bike to car ownership.

Are you a member of the 'There's a Hole in My Wallet' club?
And does the hole in your wallet seem to be getting bigger lately? Does shopping for groceries make your palms sweat due to a serious liquidity crunch?

Studies have shown that when money gets tight in the economy, a lot of us cut back on groceries and switch to buying cheaper prepared foods that stimulate our taste buds but are not necessarily good for us. According to most health officials, the economic slump has a devastating impact on the population's diet and health.

A lot of us may actually wind up packing on the pounds by eating so-called 'comfort foods' that are laden with sugar and saturated fats.

Practical tips to prevent wallet-busting

Offered below are a few tips to help you make better choices with a limited budget. So guys, tighten your belts!

Set a budget: Track all food purchases for a few weeks and identify areas where you can cut back.
Use leftovers: Frozen cuts of meat, bags of cut green beans or shelled peas, other essentials that you might have forgotten about -- you will find use for all of them.
Off-season foods are always more expensive: Do you really need to buy out-of-season fresh foods each week, or will frozen veggies do? In-season produce is hands down less expensive. Set a weekly or monthly spending limit.
Make a shopping list, and then stick to it: Keep a running list on the fridge and write down necessities as you think of them. Before you're off to the store, find out what's there in your pantry and fridge and add or remove items as needed.
Buy only what you'll use: Purchase foods that you use regularly. Remember, fruit and vegetables are still fairly cheap and also very filling, so don�t miss out on them.
Do not experiment with new foods: If you happen to dislike a particular food or cuisine, this isn't the time to try it. It will likely end up in the trash.
Don't buy in bulk unnecessarily: Buying in bulk only helps if a food is a staple in your house, like whole wheat flour, eggs, biscuits, fruit or some staple vegetables like potatoes and onions.
Be realistic: If you don't eat too much of a particular food, don't buy a super-sized amount, as you probably will never get through the whole thing.
Know your good, bad and evil comfort foods: Cook more at home -- it's much cheaper. And cut down on buttery baked foods like pastries, pies, puffs, cakes as well as other packaged foods like wafers, cookies, mixtures and fried variants. They're expensive, unnecessary and will make you gain weight. What's wrong with soul-satisfying soups, grilled home-made panini sandwiches, chicken frankies or rolls and savoury veggie omelettes instead? These are just a few substitutes that are not only healthy, but provide you with loads of nutrition.
Now for a little savings game:

Dinner for two at a restaurant involves:
Waiting time of 30 minutes
Cost:
1 portion of salad: Rs 50
4 rotis: Rs 100
1 portion gobi mattar: Rs 90
1 portion dal makhani: Rs 120
2 portions of dessert: Rs 240
Total bill: Rs 600

Dinner for two at home involves:
A few minutes' planning time (this can be done while you're commuting to or from work)
Preparation time of 30 minutes
Cost:
1 portion of salad: Rs 20
4 rotis: Rs 10
1 portion gobi mattar: Rs 25
1 portion dal tadka: Rs 50
2 portions of dessert (sliced fresh fruit): Rs 50
Total bill: Rs 155

Which is the healthier option, in terms of diet and cost? Think about it! Food prepared at home is less expensive, more nutritious and can feed more people.

So put on your recession cap and ensure:

That you balance your budget scale and your meals -- never, never overeat.
That you're smart and turn this into an opportunity to save some money and work your way to a healthier you.
Seal that hole in your wallet, make the moolah go farther and feel good about yourself, knowing you are a step ahead of the game!