Mid Cap
September 4, 2012
India’s business houses are hardly the paragons of virtue as everyone knows. Many of the business houses are known to siphon money from the public companies […]
July 6, 2012
Any BRICs investor can tell you intuitivity without performing extensive spreadsheet analysis that putting money into debt has proven to be more profitable than equity over […]
June 25, 2012
I have always said that investing in Indian mutual funds is a dumb idea given the lack of regulation , under performance, high fees and front […]
July 10, 2011
Mutual Fund Companies have seen a steady growth driven by the growing financial assets being generated by the fast growing Indian economy.But the Mutual Fund Industry like other sectors such as Real Estate and Telecom too has come under the spotlight for some illegal activity.While you can't call the industry corrupt because of some fraudulent activities it does raise questions on the industry ethics.Top Mutual Funds in the country like HDFC and L&T have been fined by the stock market regulator SEBI for front running.For those who don't understand what the term means,front running is an illegal activity whereby a fund manager or fund official makes personal gains by making trades on his account before doing a trade for the fund.This causes losses for the fund investor and is akin to stealing.However like other corrupt practices in the stock market industry,SEBI lets them go with small fines which don't deter more such frauds.It is also not unknown that some fund managers connive with company promoters and market operators to rig and do circular trading.Not only is this a problem,another massive problem with the industry is its underperformance as compared to the benchmarks.While earlier mutual funds were known to outperform the benchmarks like the Nifty,a recent Crisil study has dispelled this myth.Given these disadvantages of mutual fund ,it is time to invest in Indian ETFs though not a lot of variety exists in the Indian stock market yet.
July 7, 2011
Mutual Funds are one of the most common ways to invest in equity and debt and a large mutual fund industry is involved in this endeavour.There are large number of high paying professions in Wall Street which depend on the mutual fund industry which include stock brokers and sales persons.However the amount of cost of mutual funds is not proportionate to the gains they give out.This is the reason that Exchange Traded Funds (ETFs) and passive funds which have lower expense ratios and expenses are gaining billions of dollars in money.The reason is that a large number of mutual funds regularly underperform the benchmarks.This has caused massive heartburn amongst investors who have to pay large amounts of fees for the services of the professional fund managers.This has been the trend historically and found amongst numerous countries as well.Besides the costs of the sales and distribution of these mutual fund with their hefty commissions also falls on the investor ultimately.However the prevailing custom of investing in mutual funds is not easily broken despite the underperformance of the mutual fund industry.Most of the advantages of mutual fund can now be found in ETFs which have much lower costs.They also remove the disadvantages such as the possibility of a bad mutual fund manager.
July 2, 2011
Note corruption is nothing new for the Big 4 firms with another one PriceWaterhouseCoopers caught red handed in the massive billion dollar Satyam corruption scam.Two of the partners of PWC were sent to jail in the fraud which involved cooking the books for almost 8 years.Having a Big 4 auditor is a must for any well known big public company.However the reputation of these Big 4 continues to get besmirched with newer scandals.It does not take a rocket scientist to guess that bribes were involved as rules were circumvented and Corporation Bank top brass was also involved.Government Tenders are a massive hotspot of corruption as they are opaque and powers rest with a few.Lack of transparency results in massive embezzlement of taxpayer money.Corporation Bank.Note Relaince India's biggest company is facing an investigation along with the oil and gas regulator DGH.Recently LIC Housing Finance one of India's largest housing finance companies was involved in a scam as well alongwith top official form other PSU Banks for taking bribes.This resulted in a massive stock price fall for a number of these companies.Expect Corporation Bank stock to take a similar dive hurting the shareholders.Investing in the Indian stock market has become more dangerous than ever where a corruption scam hides under every stone.Government companies which are considered safer by investors too are being proved problematic with PSU CEOs now being jailed for scams.India's largest aluminum company NALCO CEO has been jailed for accepting gold bricks in bribes
May 31, 2011
Indian equity investing through offshore funds might not be the best idea as these funds have underperformed the benchmarks by putting too much weight on infrastructure and capital goods sector.Note lured by the $500 billion investment target for Indian infrastructure,an Indian infra ETF INXX was also launched at a ludicrous valuation.However the endemic corruption in India with scams related to major infrastructure sectors like Real Estate,Telecom popping up everyday,its not a surprise that the stocks have tanked.Note investing in the Indian stocks markets is hazardous with issues like insider trading,pump and dump schemes quite rampant.The risks of corruption are huge and even top asset managers like Goldman,GMO have become victims of fly by night operators just like a simple retail investor.
March 7, 2011
Lovable Lingerie is an innerwear textile company that is coming out with a $20 million IPO.Unlike other totally junk issues which are totally hands of market operators,this one seems to have decent fundamentals and the valuation is not too expensive either.The company has managed to sell 6% pre-IPO to Sequioa Capital which is one of the blue blood PE firms in the country.However this should not be an endorsement given that a number of their investments have bombed in the recent mid cap and small cap carnage.Corporate governance and management issues in small companies in India is totally out of control so investing just based on pure fundamentals does not help.Also a number of other companies in the same sector in textiles remain at attractive valuations.That said the company does have good differentiation as it leverages on the fast growing Indian consumer growth story.The company sells Lingerie though top retail outlets like Lifestyle,Shopper's Stop in top Indian metros and has good brand recall.Here are the positives and negatives of the company based on its DRHP.
February 28, 2011
Corruption in India has taken massive proportions with a new scam being unearthed almost every day .However this has not metered the architects of corruption in India from continuing their looting spree.While the 2G Telecom Scam throws up new looting revelations,newer corruption scams are also competing for newspaper inches.Investing in the Indian stock markets is at best a hazardous activity with most of the promoters trying to fleece shareholders.Mid cap and small cap scams have already resulted in massive losses.Now investing in India's largest companies belonging to the main Nifty Index has also become dangerous.While the scam related to the ADAG Group has already resulted in 80-90% fall from the peaks of the companies of this group,others are joining in.Nalco which is a government owned integrated aluminum producer was thought to be one of the safest companies to invest in.However even this company has fallen.The CEO of the company was found taking bribes in the form of gold bricks in return for favors.
February 7, 2011
These 3 Indian companies DB Realty,Sun TV,Spice Jet have very little to relate to each other.One is a real estate company,one is one of the fastest growing media companies while the third one is one of the biggest low cost airlines in which Wilbur Ross was an investor.The common thread running through these companies is their association with a regional political party in India at the center of a massive billion dollar telecom scam in India.The leader of this party Raja was recently sacked from his post as the telecom minister and has now earned the dubious distinction of becoming the first minister to get jail time from his own government.Corruption Scandals have ruled the roost in the last 6 months frequently leading to huge stock price drops.Small Cap,Mid cap scandals,insider trading,bribery rings have all been documented by this blog which led to huge losses for investors.
December 9, 2010
Indian Small Cap and Mid Cap Stocks got massacred today even as the rest of the global markets were up.There was no specific catalysts for the sharp sell off in the small cap space which was down more than 5% with a large number of stocks hitting circuit filters on their way down.FII and brokerage favorite mid cap stocks were the worst off declining by anywhere between 10-20%.Note India has seen a huge wave of scandals hitting the political and business spheres in the past couple of months.While Corruption is nothing new to India with India's Supreme Court calling "Corruption a Way of Life" ,the rising frequency has unnerved the investors.The Stock Market has also seen a number of scams hitting the news with well regarded stocks tanking by more than 50% in less than a week.Since its hard to explain all the scams that have been hitting India,I am listing out the blog posts explaining the scams here.