• In order to fetch higher returns than investing in money markets (short term debt instruments), Asset Management Companies such as Kotak Asset Management and ICICI Prudential Asset Management have announced their decision to accept fresh money for arbitrage schemes.

• The Ministry of Finance (MoF) will incorporate the "regulatory impact assessment module", to assess the impact of the actions of three regulators - SEBI, PFRDA and IRDA. The MoF will bring on-board third-party consultants to carry out this study. The move is an effort to strengthen and deepen the financial markets.

• ICICI Prudential Life Insurance launched a new Unit Linked Insurance Policy called 'ICICI Pru Pinnacle'. The plan is a wealth creation plan, which offers customers an advantage of varying exposure towards equities, along with a downside protection. The investor has to make a minimum premium payment of Rs 50,000 per year for a period of 3 years.

• Fidelity Mutual Fund launched its new fund/scheme called 'Fidelity India Value Fund'. The fund is an open-ended diversified equity fund, managed by Mr. Nitin Bajaj, which will invest in companies that have more intrinsic value than reflected in their stock prices. The new fund offer opened for subscription on November 16, and will remain open till December 15, 2009.

• National Securities Depository Limited (NSDL) has launched a facility named 'SIMPLE' (Submission of Instruction through Mobile Phone Login Easily), which enables investors to submit delivery instruction slips to transfer securities in their brokers account for the purpose of pay-in. Investors who wish to avail of this facility require a GPRS enabled mobile phone and need to register to SPEED e-service as a password user through NSDL.

• Now voting on the corporate affairs is just a click away; Central Depository Services (India) Ltd has launched its e-voting system. During the voting period investors can cast their votes by visiting the website (www.evotingindia.com) by entering their demat account number and Permanent Account Number (PAN) as password.

• SEBI is planning to reduce the time taken to list the Initial Public Offers (IPOs) to 7 days. Currently, it takes 20 days to list the IPO issue, which builds the risk for the investors and issuers. The move is intended to bring in more efficiency to the primary market issues.

• Food inflation rose to 14.6% for the week ended November 7, 2009. On weekly basis, it rose by 0.87% from 13.68% in the previous week.

• The Organisation for Economic Cooperation and Development (OECD) doubled its growth forecast for the year 2010. India and China will lead the recovery, with India growing at 7.3% and China by 10.2% in 2010.

• According to the Ernst & Young Institutional Investor IPO Survey 2009, a handful of Initial Public Offering (IPO) markets would show recovery by the end of 2009. Of over 300 institutional investors surveyed across the world, 57% believe that India and Brazil are most likely to lead recovery by the end of 2009.

• India's financial hub Mumbai and the capital Delhi, along with other emerging markets are likely to make it to the league of the world's wealthiest cities by 2025, says a report.

• SEBI has recently amended 'employee reservation' for allotment of share to employees in case of Follow-on Public Offers (FPO) to Rs 1 lakh and has also altered the discount to employees on the issue price from 10% to 5%.

• To bridge the fiscal deficit which is at Rs 401,000 crore, or 6.8% of GDP, the government hopes to raise Rs 25,000 crore, which is 6.2% of the fiscal deficit. This will be raised from stake sale in public sector companies in the current financial year ending March, as a divestment strategy.

• IRDA and SEBI are paving the way for guidelines for listing insurance companies. A committee set up for the said purpose will look at the level of divestment that a company could undertake with the stock market and also discuss the valuation norms. The move will pave the way for life insurance companies to get listed on the exchange.

• UTI Dividend Yield fund, an open ended equity scheme declared a 5% tax free dividend. The record date for the dividend is fixed as November 13, 2009.

• Subscribers to CRA Lite - the low cost version of the New Pension Scheme, will not be able to open the Tier II accounts like the normal subscribers. The Pension Fund Regulatory and Development Authority (PFRDA) is negotiating the annual maintenance charges for this account with the central record keeper National Securities Depository Limited (NSDL) to bring charges to Rs 60.

• MFs online trading platform would be available by March 2010. The platform is currently subject to regulatory clearances. The platform will allow retail investors to trade, switch over and compare schemes online through a single window.

• The repurchase (repo) of corporate bonds on the stock exchange is likely to begin in the year 2010. This move is expected to give the much needed fillip to the development of the listed corporate bond market in the country.

• World confidence slips as the Bloomberg Professional Global Confidence Index fell to 60.3 from 61.7 in October. The index exceeded 50 levels for a four month period, which means there were more optimists than pessimists. The fall in this index is mainly due to the central banks' look to withdraw stimulus.

• Indians have topped the Nielsen Company's Global Confidence Index in October 2009. Consumer confidence is rising faster in BRIC countries compared to other markets due to an increase in job prospects.

• Banks get tougher!  If your relative is a defaulter in his credit (loan) repayment, then there are possibilities of you being denied a loan.

• The core sectors growth slips to 4% in September. The six core sectors include cement, coal, steel, electricity, crude oil and petroleum refinery products.

• Investors in the recent bull market are falling prey to shady web-sites offering stock tips. The recommendations on these web-sites are seldom backed by any research. Such web-sites have seen an increase of 75% in their subscriber base.

• RBI in its monetary policy proposed to set a provision for Non Performing Assets (NPAs) at 70%. This brought the BSE Banking Index down by 4% and contributed to the fall of 2.31% in the BSE Sensex on Tuesday - October 27, 2009. Banks will have to set aside a bigger slice of their earnings for non-performing loans, even if the borrower may not eventually default.

• The proposed launch of Floating rate bonds by RBI will eliminate the interest rate risk for investors. The risk of reinvesting interest payments will also be eliminated by the introduction of STRIPS (Separate Trading of Registered Interest and Principal Securities).

• The corporate issuance of Non Convertible Debentures (NCD) with a maturity of less than 1 year, are currently unregulated. To cover this regulatory gap, RBI will draft guidelines on the same which will be on its web-site by November end.

• The exchange traded currency derivatives which were recently launched, have caught the imagination of investors, given the rupee-dollar volatility.

• After SEBI banning the entry load on mutual funds, Asset Management Companies (AMCs) have seen a drop in the mobilization of the Assets Under Management (AUM). This has now resulted in AMCs redrawing their business plans around PMS.

• The US economy expanded for the first time since mid -2008, growing at 3.5% in the three months ended in September 2009. Early days, but the impact can be seen in India.

Today’s Fusionomics report on Gold:

~~~

Gold jumped to above $1039 on dollar weakness, a Bank of America supportive report and strong Indian jeweller demand. That’s above the previous record intra-day high of $1034, hit on 17th March 2008. Indeed, factors that could still drive the gold price higher:
1. An increase in inflation fears, which have played only a small part in the rally so far.
2. A creeping loss of confidence in paper currencies and the US dollar.
3. The psychology of the market. The headlines that gold is setting new record highs in nominal terms will inevitably draw attention to the fact that gold is still trading well below the all-time high of around $2,300 in real (inflation-adjusted) terms, which was seen briefly in 1980. This will encourage talk of the potential for further explosive price gains.
The upshot is that don’t be surprised to see gold break still higher in the coming weeks. However, a mix of unfounded inflation fears, conspiracy theories and speculative demand looks more like the ingredients for a speculative bubble than the grounds for a sustainable increase in prices. Recall that after peaking at around $850 on 18th January 1980, gold quickly slumped to $650 by the end of January and below $500 again by April. While consolidation will likely occur, key support levels at these breakout points may hold leading to gradual higher gold prices over the intermediate/long term. The focal point of such a scenario would be pinned on the US Dollar.

United Arab Emirates shares gained for a sixth day. The ADX General Index of stocks in Abu Dhabi, holder of the world’s sixth largest crude reserves, climbed 1.4 percent to the highest closing level in 10 months. Indexes in Kazakhstan, Latvia, Dubai and Bulgaria rose more than 1 percent.

Bank of China Ltd., which led the nation’s $1.1 trillion lending spree in the first half, said ample liquidity has caused “bubbles” in global markets. “You see asset bubbles in commodities, stocks and real estate, not only in China, but everywhere,” Vice President Zhu Min said in an interview in Dalian today.

“Many investors are now concerned that global emerging market valuations are stretched, leaving the markets vulnerable,” Jeffrey Palma, a Stamford, Connecticut-based global equity strategist at UBS AG, wrote in a research note. “We find that current valuations still imply relatively modest long-term growth rates.”

While Barrick Gold's (ABX) decision to eliminate all of its hedges on the price of gold may end up marking a short-term top in the price of the commodity, technicians would argue that the company's decision was a good one.  As shown below, the price of gold is in the late stages of a reverse head and shoulders pattern.  If this is the case, and the commodity can finally decisively break its neckline level of $1,000, this pattern would imply a price target of $1,300 for the metal.

Foreign institutional investors (FIIs) have been selling stocks in the past few sessions. This shows that the rally is largely contributed by domestic institutions. It is expected to remain as long as the liquidity situation remains easy,” said Deepak Jasani, head of research, HDFC Securities Ltd.

That's why FIIs are selling !

In the meanwhile, equity markets in the BRIC nations have come a long way in a surprisingly short time. Here's some interesting statistics for you. China's Shanghai Composite Index and Brazil's Bovespa Index have soared 89% and 45% respectively this year. Back here in India, the BSE-Sensex has climbed 59%, while Russia's RTS Index has gained 64%. In contrast to that, the Dow Jones in the US and Japan's Nikkei indices have risen by just around 4% and 14% respectively, a pittance compared to the gains in BRIC markets.

BRIC or no brick... we understand the US is going through a lonnnnng recovery!

Shriram Transport Finance Company Limited (STFC), a player in commercial vehicle finance, is offering fixed deposits at attractive rates. As depicted in the graph below, the rates offered by this company are more than the bank rates by 2% - 4%. What makes this even better is that the cumulative fixed deposit scheme is compounded quarterly. For example, if you invest Rs 25,000 for 1 year @ 9% p. a. compounded quarterly, the maturity value of your investment would be Rs 27,325 and the effective rate will be 9.3% p.a. Whereas Rs 25,000 invested in HDFC bank for a year will fetch you Rs 26,469; a difference of Rs 856.

However, bank FDs are less risky than corporate FDs. The ability of the company to service these deposits depends on its ability to generate cash flows which in turn depends upon various factors like the nature of its business, demand for its products, competition in the industry it operates, which involves analyzing and forecasting the company's financials. If the company faces financial difficulties it will find it difficult to service these deposits. Hence, investing in this FD would depend on the investor's risk-appetite.

Honestly, for a few extra %age points - I dont want to risk my total capital being lost. With banks, the risk of total capital (principal) is minimum. This is what I call a foolish decision - fighting for those extra points with higher risk.

The Indian markets ended the week on a strong note with its benchmark index, BSE-Sensex rising by about 4% and in the process touching its highest level in over a month. A key reason for this performance during the week is the announcement of June quarter results by industry heavyweights, which seem to have beaten market expectations. In addition, positive cues from global markets also added to the cheer. Key global indices ended the week higher by about 4% to 6%. Asian markets such as Hong Kong, Japan and China led the pack of gainers recording weekly gains of about 6% each. European markets, Germany and France followed suit, recording gains of about 5% each. The US, Singapore and UK markets were amongst the lowest gainers this week, recording gains of about 4% each.

Today's chart of the day shows the ratio of market capitalisation to GDP, which Warren Buffett uses as an important metric to judge whether a country's stock prices are cheap or expensive in general. When we compare the ratio of India, China and Brazil with the US, what appears stark is that the Indian stockmarket (at 2 times GDP), and not the one in China, was in a bubble territory at the end of 2007. At the current levels still, India remains the most expensive within this group on this ratio. The Chinese markets, however, are the cheapest!

Another reason to wait for an entry...

Despite a consistent record of strong GDP - probably second only to China’s growth - India is caught in its own tangles of bureaucracy, corruption, a lack of infrastructure, and mostly self-serving politicians. We need huge resources to improve the lives of the 400 million poor people in this country and few have worked out the cost - or the benefits - of building this India.

The continued terrorist attacks on Indian soil - there were 34 terror attacks in India - continues to expose the corruption and the inefficiency of the political and bureaucratic system. While mad terrorists with a desire to die can never be stopped, the ease at which they can terrorize is what is terrifying.

On the business side, Indian entrepreneurs have done well despite having a government, not because these entrepreneurs work in a supportive government framework. Most ministers who set policies are influenced by lobbies, not by a selfless national goal. And it is this lobbying that allows many socially destructive Indian business houses to thrive. They live off their political connections and political blessing.

And there continue to be managements - everywhere in the world, including India - who will be happy to take advantage of bad laws or the silence of investors to further their private wealth, at the cost of the larger shareholder base. There were 2 notable such events last year: Ranbaxy and Satyam. The government, as a majority shareholder in many PSU entities, is also guilty of using many listed companies to further its political objectives - and putting the price tag on the silent, minority shareholders. Expect more theft.

But the "India risk" remains - as it has for over 40 years - and you need to continue to navigate your investments in this environment.

On selling your business to Berkshire vs. private equity: "You can sell it to Berkshire, and we'll put it in the Metropolitan Museum; it'll have a wing all by itself; it'll be there forever. Or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.''

Fascinating analysis from Jeffrey Gundlach, Chief Investment Officer from TCW, titled The Jalopy Economy. Jeff places much of the blame for the nation’s current woes on our addiction to credit — a “Great Debt Binge — A Tragedy in 3 Acts.”

The chart is especially telling:

>

Total Credit market Debt as a % of US GDP

Bring it on!

Indian and other Asian markets had a strong last week on the back of a general improvement in the economic scenario. In India specifically, the onset of good monsoons during the past few days added to the cheer. The BSE-Sensex closed the week up by around 9%, thereby topping the gains in other key world markets except Russia whose benchmark index rose by 10%.

Speaking at a meeting with power producers earlier this week, India's power minister Mr. Sushil Kumar Shinde said that the 11th five-year plan (2007-2012) target of adding 78,750 megawatt (MW) was on track. And then, he added that while around 80,000 MW capacity is under construction currently, the government would at least be able to deliver 65,000 MW capacity addition! So, while being confident on one side, he seemed to have suddenly remembered history of India power generation capacity addition (see today's chart of the day) and added an 'at least' to his promise.

Whether Shinde's plans are really achievable can be gauged from this chart that shows how dismal India's track record has been in the past. And given the fuel and equipment constraints that the power sector still faces, do we say any more?

Far off... history reminds us about our track record. This is precisely why all the hype around Infrastructure and Power should be killed!

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is “a good fit” because “they’re in the business of printing money and so are we.”

You sometimes wonder what these conspiracy guys sit and do all day to think up such things! US, my friends is in deep shit. No doubt about that... look elsewhere, while the going is good.

Profit booking activity during the final hour of trade led the indices to wipe out their gains and end the day on a flat note. The BSE-Sensex and the NSE-Nifty, both ended the day with marginal losses. Midcap and smallcap stocks, however ended the day with marginal gains, with the BSE-Midcap and BSE-Smallcap indices ending higher by about 0.3% and 0.4% respectively. While buying activity was witnessed in stocks from the auto, oil & gas and pharmaceutical spaces, stocks from the capital goods and metals sector bore the brunt of profit booking. At the time of writing, the overall advance to decline ratio stood at 1.2 to 1 on the BSE.

Most of the other Asian markets ended the day on a positive note today. The European indices are, however, currently trading mixed. Rupee was trading at 48.73 against the US dollar at the time of writing.