The number of advertisements by Foreign Exchange Retail Trading Companies have increased dramatically in most of the popular Internet websites in India.These Websites try to lure potential retail suckers by showing pictures of ordinary people making regular monthly income by trading in Foreign Exchange.These ads are total misinformation as hardly any retail investor makes money from FX activity.FX trading is a complex activity at which even professional investors from bulge bracket financial institutions have a hard time in making money.Retail investors almost always lose money in FX trading particularly as Foreign Exchange Trading is a zero sum game compared to equities.Huge amount of leverage makes attracting gullible investors even more easy.The FX retail trading platforms have proliferated in recent days with Retail Trading having multiplied by 900% in the last 10 years to around $100 billion daily.FXCM.com one of the popular trading platforms is coming out with an IPO in the US.These companies have benefited hugely on the back of suckering retail investors.Note these firms need a constant supply of new suckers (sorry customers) in order to run their companies.Here is a article from FT which describes the modus operandi of these firms taken right out of their handbook (IPO prospectus ).

India’s new Corruption Scandal involving a Housing Loan Scam involving Bribes paid to India’s top public bank officials has ensnared top notch financial institutions in the West as well.The whos-who of Wall Street got dazed by spectacular growth and profits of a 3 year old financial outfit in India which had been built on a foundation of lies and bribers.This Corruption Scam was started by a Financial Outfit called Money Matter Financial Services which started as a 2 person outfit.However through arranging of debt to big corporate houses by paying bribes to top officials of India’s large government owned institutions such as Bank of Indian,PNB and others,the outfit saw its share price increase by 7 times.

I have been repeatedly pointing out the dangers of investing in Real Estate Companies as more and more skeletons tumble from the closet.Its an open secret that Real Estate Companies in India fudge their Financial Statements through Creative Accounting and other means such that even Fund Managers don’t invest in the Realty Sector.Major Real Estate Companies like IREO and Emaar MGF have played prominent role in some of the major corruption scams rocking the country.Now more big Real Estate Firms have been implicated for their role in other corruption scandals.DB Realty a Mumbai based Realty Company has been found to be a prime suspect in the LIC Housing Finance Scam where the CBI has arrested.Some construction companies like Man Infrastructure,HCC have also become a target of investigation.

LIC Housing Finance is one of India’s Largest Home Lenders with a huge distribution network around the country.LIC Housing Finance Stock has been on a roll propelled by fast growth of the company and the housing loan growth sector.The Company was a relatively safe investment being promoted by Life Insurance Corporation (LIC) which is India’s largest insurance company owned fully by the government.The Foreign Ownership of the LIC Housing Finance Shareholding is quite high at 40%+ due to its relative safety and high growth.However the Central Bureau of Investigations (CBI) raids on the company has resulted in a sharp 20% price fall.The company’s top officials have been implicated in misappropriation of money and home loan scams along with a company called Money Matters.

India’s Fast Growing Economy is seeing substantial churn in the Top 10 Rankings for Companies.Coal India which recently did a successful IPO straightaway went from being a Government Owned Private Company to the Top 5 in Market Capitalization Rankings.The Top 10 Rankings are dominated by State Owned Companies known as PSUs in India.Despite Privatization in the 1990s,Government Companies Lead the Rankings.Note the Top 10 Rankings don’t have any Private Companies because of the lack of good information about their Financials.Note Most of the Largest Companies in India are related to Banding and Oil/Gas as is the case worldwide.India’s Technology Companies like Infosys,TCS and others are still way behind in Revenues compared to the dominant Materials,Fossil Fuel,Industrial and Financial Sectors.However note that the diversity is much greater when you rank the companies by their market capitalization.TCS and Infosys are both amongst the top 5 recovering strongly in 2010 from their 2008 underperformance.You also see a Capital Goods and Telecom Representation in this Top 10 Rankings

Microfinance has become one of the hottest growth sectors in India attracting Private Equity Companies eager to take advantage of India’s Growth Story.A Number of For-Profit Microfinance Companies have grown exponentially in recent times with funds raised from Foreign PE Firms.The Business Model of these Financial Intermediaries is highly profitable with 25-40% Interest Rates being charged from India’s Poor Population who don’t have access to credit facilities.Borrowing from Banks at 10-12% and lending at 25% gives a huge spread which more than covers the cost of operations in dealing with a huge number of very small borrowers in far flung areas.The recent IPO of SKS Microfinance was a huge success instantly makings it promoters instant millionaires.The stock which was expensively valued nonetheless managed to climb by almost 40% in the last 2 months.It brought into focus the whether making such huge profits through essentialy usury from the poor was ethical or not.