Tuesday, December 30, 2008

Book on Prabakaran

Most people approach Prabakaran and his widely known LTTE on emotional ground. Either they blindly support or they blindly oppose. Both there approaches fail to paint complete picture about him. His organization was started with a rusted revolver, but now Prabakaran is running a government. He possesses police force, judicial system, army, navy and air force ... everything that a nation ought to has.

Before arriving into any judgment about Prabakaran and his outfit, it becomes imperative to understand the history of Sri Lanka's ethnic conflict. What was the beginning point the endless war between Sinhalese and Tamils? What started it and why? How long this fire is going to be on? Can the self determination question of Tamils could be resolved only at war front? What are the innocent civilians caught in the the crossfire going to see a dawn? Is Tamil Eelam the only solution? Can Prabakaran win that for his men? Or is everything is going to end at his demise?

LTTE is a banned organization in India. Prabakaran is a main accused in Rajiv Gandhi's murder. Many countries in the world have banned the tigers. Sri Lankan government does not show any signs of putting an end to the war as it believes tigers can be completely destroyed. What is in store for the rebels? What is going to be its future?

The book on Prabakaran tries to examine these questions.

Friday, December 19, 2008

Free stock market tips india

Just came across this paragraph from fortnightly investment magazine 'Capital market' .. It is not only impressive but thought provoking as well.

"Many research analysts do not invest in equities, but preach to investors on what to buy, hold or sell. As per the present regulation, a research analyst needs to disclose his holding in the company that he is commenting. It would be far better to make it mandatory for the analyst to invest a certain pre-defined sum in the recommended stocks for the period mentioned in the research report. This would definitely improve the sense of responsibility and accountability in the research community. It would also provide on-the-job training to analysts and make them aware of the risks involved in equity investment. Remember those who actually invest are shrewder than those who simply preach"

When someone shows up in response to the question Who is the

best stock market analyst in India

, better beware !!

Monday, November 03, 2008

Indo-US nuclear deal.. - A look back

- Chellamuthu Kuppusamy

That was something unprecedented in the history of Indian democracy. We had never seen such a sensational 'display of money' on the parliamentary floor. Trust me those were some of the tragic cum hilarious scenes we witnessed during the recent 'no confidence motion' and it could match any nail biting one day cricket game. You know what I am coming to. Yes, it is about the widely debated Indo-US 'civil' nuclear deal.

The Unites States Congress which is the House of Representatives (akin to Lok Sabha) and the Senate which is the upper house have given their blessing to this historic deal on September 28th and October 1st respectively. There was a sense of vindication, according to the Indian ambassador to the US Ronen Sen.

What makes this deal so special and time critical? Does India really surrender its national interest and sovereignty with this deal? A little recap from the history would help answer these questions.

The United States has the reputation of being the only nation in the history of mankind to deploy nuclear weapon and massacre more than 200 thousand people in August 1945. That eventually brought the World War II to an end.

Postwar era saw the world dividing into two camps, needless to mention American camp & Soviet camp. Mutual suspicion, secret nuclear programs and arm race was inevitable. Need for checking the proliferation of nuclear arms was felt and Nuclear Non-Proliferation Treaty (NPT or NNPT) was born thanks to the efforts from Ireland and Finland. That was in 1968.

NPT recognized the United States, the United Kingdom, France, Russia, and China as nuclear weapon states (NWS) while the others were identified as non nuclear weapon states (NNWS). All the nations recognized by the UN signed NPT except India, Pakistan and Israel. For India, NPT did not prevent proliferation but actually classified the counties as ‘nuclear haves’ and ‘nuclear not haves’ as it only prevents ‘not have’ nations developing atomic armory after 1968.

Being a non-signatory of NPT, there was no restriction on India for conducting nuclear test. It perhaps carried out a test in 1974 to be coded as ‘Smiling Buddha’ which provoked serious reactions around the globe. Nuclear fuel supplying countries formed Nuclear Suppliers Group (NSG) that subsequently decided not to assist India in the civil nuclear energy space.

There were 34 long years before this ban could relax. Indo-US deal enables India to access outside civil nuclear technologies and fuel, while still being a non-signatory of NPT. This is the best things that could happen to India.

World’s largest democracy only has to assure that it would not mix its civil and military nuclear establishments, and let IAEA supervise its civilian atomic power station. An estimated 14 out of the existing 22 reactors are to be used for civil and the rest for military purpose.

Following the foot prints of the U.S, France has inked an agreement to sell nuclear technology and reactors to India. What France plans to sell to India is the large 1,600 MW reactor, indeed, the largest of kind in commercial operations in the world, says the Hindu Business Line.

We have an installed capacity of 145,587.97 MW, primarily sourced from coal fired thermal power. France, on the other hand, generates 78.8 % of its electricity from nuclear power. We are at 2.9%. A long way to go indeed! We are far from uninterrupted power supply.

Wednesday, September 17, 2008

1930 around the corner?

- Chellamuthu Kuppusamy

When Christopher Columbus landed in North America he would not have foreseen a financial institution to be established by his future fellow immigrants from western Europe, let alone that institution sending tremor to the financial market across the globe. Yes, I am talking about Lehman Brothers.

Henry Lehman was just 23-year-old when immigrated to the United States from Germany in 1844. He choose to settle down in the southern state of Alabama. Two of his brothers Emanuel & Mayer too took separate ships to the American shore and three of them formed Lehman Brothers in 1850. They took cotton trade as their primary business in which they excelled. In the next few years the center of cotton trade shifted from the south to New York City, which of course was - as it is today - the center of trading & commission business.

Civil war erupted 1982 and Lehman brothers financed Alabama state's reconstruction program. That was the beginning and the end came a couple of days ago. In the meantime they have grew, grew continually. They underwrote securities - initial public offers in particular - and did almost everything in the financial market. It did merger with American express and then de-merged again in 1994.

Subprime crisis that surfaced late last year forced Lehman Brothers to close down subprime division 'BNC Mortgage' and sending around 1,200 people home. On September 13 it decided to take bankruptcy protection. Its valuation based on September 15 stock price stood at $130 million. It's reported revenue for 2007 was 454 times more than this.

Sixth months ago Bear Stearns, the fifth largest bank, was on the prink of bankruptcy. JP Morgan Chase bought it out for dirt cheap $2 per share. That was not alone. Just recently Fannie Mae and Freddie Mac were bailed out by the US government. Now even before this 'broke' news from America's fourth largest investment bank Lehman could sink in, even more troubling stories come out. American International Group (AIG), the largest insurance firm in the US, would become next Lehman unless it gets around $70 - $80 billion. Luckily FED has come forward to perform rescue act. Likewise Merrill Lynch & Co was luck enough to find a buyer in Bank of America.

The US economy has been the driving force of the global economy, whether we like it or not. Any trouble in the US is not a standalone subject in the current world where everything is interconnected and eventually nothing is insulted in the great financial eco-system.

Already some analysts are talking about 'another' great repression of 1930 that we have only studied in history books. But we are unlikely to see 'another' great depression, but a greater or lesser depression, because the world economy now is interconnected while it was insulated back in 1930.

Friday, August 01, 2008

Troubled waters - Indian economy

- Chellamuthu Kuppusamy

I was watching the US market opening report on UTVI last night and the female reporter from NYSE was elaborating the jobless claims in that country reaching 44 thousands plus level, which apparently is the highest since 2003. (We all know that 2003 is the year when the market bottomed out, at least in India with SENSEX around 3,000 mark) The united states is a strong economy where people spend a lot and they spend most of their incomes and borrowings. Therefore unemployment figures do not board well for the largest economy in the world, which not only determine the destiny of investments in that country but elsewhere around the globe.

When we talk about unemployment problem, what went unnoticed is the textile industry in India. In the last one year 3.5 lakh jobs have been lost in this space. There are already reports about negative inflation-adjusted salary hike in the much discussed IT sector where smaller players might loose their skin over the time. You should not have missed the news that Hexaware is trimming down their work force.

Automobile industry in India, which is already struggling to swallow the increased input costs, might face slowdown in demand thanks to RBI's move of hiking interest rate to combat inflation. Governor Y.V.Reddy in his last monitory policy announcement asserted that the idea is bring the inflation down to 7 % by 2009 March from the current level around 12%. Inflation is at 13 year high now. The interest rate was around 17% in 1995, which is exactly that period before 13 years. So, more rate hikes on the cards?

One areas that bestowed unprecedented return, namely real estates, is already facing softening demand and prices. Real estate and construction companies' decline was double that the average decline produced by the market on the bourses. In 2008, around 80 million sq ft (45 million sq ft in 2007) of commercial space supply is expected; indicating that supply is running ahead of demand. With the lending rate going up and the era of easy money is a thing of the past, one does not need to be rocket scientist to predict further decline in property prices across the country. Dalal street investment journal quotes on the current issue: "As for the NAV, a study states that 30 per cent decline in property prices leads to 50 per cent erosion of NAV and hence with property prices softening, NAV of companies with high land bank needs to be revisited.

Needless to say, banking was understandably the worst hit by inflation. Softening credit growth, upward trend in NPA etc can be expected. The, "Sir, would you be interested in any personal loans?" calls you normally get private banks on your mobile might change as, "Sir, we have an attractive fixed deposit scheme offering...". Most of the bank now trade 40-50 down from their 52 week high. They are also affected by treasury losses due to interest rate increment. This was evident in ICICI bank's recently announced quarterly results. The bank's net was dragged down by the treasury loss.

On top of all these we should not forget that our economy is still not detached from the agriculture whose fortune heavily depends on monsoon. With around 60 % of our population still in rural area basing their lives on the oldest vocation on this earth, severe draught for a couple of years can put some brakes on the growth.

Beware, cost of living, cost of health care, cost of politics (price tag for MPs), cost of housing, cost of education and of course the cost of girlfriends are on the rise and they are unlikely to come down.

What lies ahead? Have we shifted from a 'sustained bull run' to a 'sustained bear run' with periodic correction on the upper side? Has the India growth story faded? Are global slowdown and global commodity prices press the India Inc? What lies ahead?

Yes, it is troubled waters. FISH, IF YOU CAN & IF YOU HAVE HAVE THE WILL...

Wednesday, June 25, 2008

Real estate FDI inflow up nearly five-fold

- Chellamuthu Kuppusamy
Quite understandably there are reports on surging inflation, increasing interest rates and the potential impact on housing sector etc flowing across. This, along with FIIs pulling out from Indian equity market, is not surprising indeed. But here is an interesting piece of information that goes against this theory. FDI investment in real estate sector has increased nearly five-fold this year.

Courtesy: Hindu business line.

New Delhi, June 24"
The Indian real estate and housing space emerged as the darling of foreign investors in 2007-08, clinching FDI equity inflows of about Rs 8,749 crore, a near five-fold increase over FY07.
“The investors have seen that the real estate potential in India is huge. The returns are quite attractive. In fact, we see the trend picking up even further this year as the prices are getting more attractive for investors,” Mr Ramesh Sanka, Chief Financial Officer at DLF said.
Late last year, DLF Ltd had sold 49 per cent stake in eight residential project SPVs to private equity investors for a total consideration of Rs 1,675 crore.
A Merrill Lynch & Co entity had bought 49 per cent equity in seven residential projects in Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. The company — headed by Mr K.P. Singh — has also diluted 49 per cent stake, in another middle-income housing project in Panchkula, Haryana, to Brahma Investments for Rs 194 crore.
According to data released by the Government on Tuesday, the real estate sector, thrown open in 2004-05, saw the FDI picking up significantly between FY05 and FY08; it was Rs 171 crore in 2005-06 surging to Rs 2,121 crore in 2006-07.
“Over the last three years, there has been a build-up in investor interest. We saw the impact of that interest and euphoria for FY07 and FY08 as new townships and projects were announced. Depending on the asset class within real estate sector, the average rate of return stood at 25-35 per cent for India, against a global average of single digit return,” Mr Sanjay Verma, Executive Managing Director, South Asia, of Cushman & Wakefield said.
“However, at the beginning of the current year we have seen some asset bubble deflation. With prices moving southwards, choppiness in the stock markets, pressure on interest rates and global issues, while deals will still happen, pricing will be the question,” Mr Verma added.