Maximise returns from long term investment

“Every investor is a long-term investor until the stock market tanks,’’ says Amar Pandit, certified financial planner (CFP) with My Financial Advisor, a wealth management firm. “You get to know his mental make up only by how he reacts to the market fall. If he stops or discontinues his regular investments, it becomes clear that he doesn’t have the stomach for risk. Also, he can’t think of his investments in the long term,’’ adds Pandit.

Financial experts have many such stories identify the so-called long-term investor from others. This is because most of them aver that planning investments with a long-term perspective is vital to one’s financial well being. Though one often comes across well meaning advice about long-term planning, people often fail to stick to it—especially when it comes to equity investments.

“It is not that equity is the only long-term investment. When one invests in real estate, public provident fund or employee’s provident fund, one knows they are long-term commitments. For example, PPF is a 15-year account and EPF can be of 30 years, depending on one’s working life. In all these, people have long-term view,’’ says Pandit.“They wouldn’t quit these investments based on short-term trends, either due to emotional reasons or because they can’t be easily liquidated. However, when it comes to equity—an instrument only meant for long-term investors—people take decisions based on short-term trends in the market,’’ he adds.

However, advisors add that one shouldn’t conclude that people haven’t realised the importance of a long-term investment perspective. “People who have been investing for some time in the market realise the importance of long-term commitment.For example, when the market was down, the impression was created that most people would discontinue their SIPs, but it was not the case,’’ says D Sundararajan, investment consultant, Trendy Investments, an investment advisory firm.

“Most seasoned investors continued with their investment programme, as they perhaps realised that it was beneficial to buy stocks when the market was down,’’ he adds.In short, if you haven’t taken a long-term view of your financial needs and planned your investments accordingly, you are very unlikely to achieve your goals. “When we talk about a life goal like retirement or child’s education, we are talking about at least 10-15 years ahead. If you don’t include the possible return over that period or the impact of inflation on your corpus, you wouldn’t get a realistic picture,’’ says a wealth manager in private sector bank.

“In such a scenario, a person will have to face unpleasant surprises in the last moment, when he wouldn’t be in a position to take remedial actions,’’ he adds.Having a long-term perspective will also come handy when you reallocate assets in your portfolio to mitigate the volatility in a certain segment. Sundararajan offers an example of how having a long-term perspective could help prune the portfolio in times of uncertainties.

“When the stock market was down, we decided to include gold in the portfolio of many clients. We took this decision on the basis of our view that the stock market may take a long term to recover because of the uncertainties in the global economy and gold would add the much needed stability to the portfolio,’’ he says.

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Forex reserves increase from tourism

Government has earned more foreign exchange from tourism in May this year as compared to the same period during 2008. Foreign exchange earnings from tourism were Rs 3,249 crore in May this year as compared to Rs 2,988 crore in 2008, registering an increase of 8.7 per cent.

However, there is a marginal decline in foreign tourist arrival in May this year. 2,95,124 foreign tourists visited the country in May 2009 against 3,00,840 in 2008. The decline is only 1.9 per cent which is marginal, said a senior Tourism Ministry official. The fall in tourist arrival was more during the first three months of the current year as compared to the corresponding period of the previous year.

The Tourism Ministry has launched the Visit India Year 2009 scheme in April to woo foreign tourists. Airlines, hotels, and tour operators have joined hands with the ministry in offering various incentives to attract tourists.There were roadshows in many countries including USA, UK, Ireland, Australia, Singapore, showcasing Indian destinations, said the official, adding that "we are hopeful that more tourists will arrive in coming months".

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NEW CHANGES FOR eFILING OF INCOME-TAX RETURN FOR AY 2009-10

PRESS RELEASE

1. New Users can register their Digital Certificate during registration process.
2. During Registration and Forgot Password, Captcha Image needs to be entered by the user for verification. If the image is not clear for the user, they can refresh and get a new image
3. After successful registration of user, User Activation URL sent through Email and user account gets activated only after the user clicks on the activation URL and login.
4. User needs to activate his/her account within 10 days of time period. After that the user account gets expired and the user needs to re-register with the EFiling application.
5. Secret Question and Answer has been added as part of Registration for more security.
6. Existing users, can update their Secret Question and Answer after the Login.
7. Upload with the digital certificate has been mandated to register/update the digital certificate before upload. If the user wants to upload with the digital certificate, the user needs to go to My Account Menu -> Update Digital Certificate page.
8. My Account Menu have an addition of the followings:
   1. Update Digital Certificate
   2. Update Secret Question and Answer
9. Password – Strength & confirmation indicator provided for the registration, change password, forgot password functionalities.
10. During XML file upload any error with the xml file will be displayed to the user at one shot. More than 5 errors will be given as a ‘.CSV’ file to the user for download.
11. After successful upload, the user can download the ITR V / ITR Acknowledgement pdf in the success page itself. ITR V/ ITR Acknowledgement pdf zip needs to be saved in the users’ computer to open the file.
12. Users can download the utilities / schema for all the years.
13. E-Filing News scroll over stops the text so that the user can read the full content.
14. Know Your Jurisdiction has been moved to Services Menu.

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Sectors and Stocks to buy

Stocks to buy, which we believe would benefit the most if the reelected Congress-led government succeeds in fulfilling its promises. But forget not, these are the long-term stocks to buy and hence are prone to the short-term fluctuations in stock markets!

• CEMENT SECTOR

The cement sector during FY 09 had already benefited from rural housing and government-funded infrastructure projects, which helped total despatches rise 8% y - o-y to 181 million tonnes. And if the re-elected UPA government takes fresh steps to expand infrastructure and rural projects, cement companies will be the direct beneficiaries.

RECOMMENDED STOCKS TO BUY FROM CEMENT SECTOR

ACC (CMP: Rs 729, P/E: 11)

For instance, Holcim-controlled ACC, which is a pan India player and one of the leading players in the sectors, would benefit from such an infrastructural push by the government. During CY 08, this company had grown its despatches by 4.9 % y-o-y to 20.86 million tonnes.

• BANKING SECTOR

The government's initiatives to infuse growth in rural infrastructure and to stabilise overall economy will have a trickle down effect on the banking sector. The government had earlier emphasised that public sector banks should have capital adequacy ratio of 12% to strengthen their operations.

RECOMMENDED STOCKS TO BUY FROM BANKING SECTOR

SBI (CMP: Rs 1731.7, P/E: 12.1)

Being the default banker to the government, State Bank of India (SBI) is expected to be a major beneficiary of the government's expansion plans. Also now that Congress led UPA government with other allies has a majority in the parliament, it will now be far easier for SBI to integrate its six associate banks with itself.

• AUTO SECTOR

Companies in the auto sector that focus on entry level market of two and four wheelers meant for cost conscious customers would see buoyant demand scenario once the rural income gets a boost due to government's thrust on rural growth.

RECOMMENDED STOCKS TO BUY FROM AUTO SECTOR

Hero Honda (CMP: Rs 1294.1, P/E: 20.2), Maruti Suzuki (CMP: Rs 960, P/E: 22.8)

While Hero Honda leads the pack in the economical two wheeler segemts, Maruti Suzuki leads the market for entry level cars. Both the companies are expected to see higher demand from rural markets in near future.

• TELECOM SECTOR

Mobile operators have been rapidly expanding their operations in rural India. The process will get a further boost given the government's focus on taking telecom services to the grass root level. UPA government has also promised in its manifesto to spread broadband services in the whole country in next three years. The sector can also expect further rationalisation in tariff rates and license fees, which may boost operational efficiencies.

RECOMMENDED STOCKS TO BUY FROM TELECOM SECTOR

Bharti Airtel (CMP: Rs 857.9, P/E: 21), Tata Comm (CMP: Rs 585.9, P/E: 61.3)

With over 60% share of rural penetration, Bharti is slated to be the biggest beneficiary of the government’s thrust on rural development. WiMax is a favoured technology to take broadband to rural areas. Tata Communications with its Wimax initiatives is likely to play a major role in this venture.

• POWER SECTOR

Power sector is likely to get a big boost due to government's programme to electrify every nook and corner of the country. A thrust on nuclear energy and subsequent agreement with the US Department of energy to secure future fuel needs, suppliers to this segment would benefit.

RECOMMENDED STOCKS TO BUY FROM POWER SECTOR

Rural Electrification Corpn (CMP: Rs 138.6, P/E: 10.6)Power Finance Corpn (CMP: Rs 200.3, P/E: 17)NTPC (CMP: Rs 216.4, P/E: 24)Areva T&D (CMP: Rs 317, P/E: 33.9)

• CAPITAL GOODS SECTOR

The sector so far has been benefited by strong demand from government's infrastructure projects . This is likely to continue given the UPA's thrust on its 'Bharat Nirman' project, which includes development of roads, water resources, electricity and other nationwide infrastructure work.

RECOMMENDED STOCKS TO BUY FROM CAPITAL GOODS SECTOR

L&T (CMP: Rs 1301.4, P/E: 22.1)Siemens (CMP: Rs 455.1, P/E: 16.1)Bhel (CMP: Rs 1982, P/E: 33.4)

All the three companies are leaders in their segments. Being India's leading engineering and infrastructure company, L&T will gain from any government plans to expand infrastructure. The other two will be benefited from the reforms in the power generation sector.

• PHARMA SECTOR

The sector will gain from government programme to aggressively expand healthcare facilities in the country. Moreover, improvement in infrastructure will also help in imporving the logistics and hence penetration of pharma companies in far flung areas.

RECOMMENDED STOCKS TO BUY FROM PHARMA SECTOR

Cipla (CMP: Rs 222.3, P/E: 22.5)Glaxosmithkline Pharma (CMP: Rs 1094.4, P/E: 15.5)

These companies being leaders in domestic market are likely to be benefited with any government expenditure in the healthcare space.

• FMCG SECTOR

The National Rural Employment Guarantee Scheme (NREGS) and Sixth Pay Commission have helped in boosting rural demand. This is likely to benefit the FMCG sector.

RECOMMENDED STOCKS TO BUY FROM FMCG SECTOR

Hindustan Unilever (CMP: Rs 231.9, P/E: 24.2)

Being India’s leading FMCG company, Hindustan Unilever will gain from any government expenditure.

• AGRICULTURE SECTOR

The government has promised to achieve food security by enacting a ‘Right to Food’ Act. This will need a significant increase in food-grain production, which in turn will raise the demand for fertilisers and pesticides. UPA also expects to increase the total arable land area under irrigation over next few years. All such initiatives bode well for companies that cater to these segments.

RECOMMENDED STOCKS TO BUY FROM AGRICULTURE SECTOR

Coromandal Fertilisers (CMP: Rs 169.5, P/E: 4.5)Rallis India (CMP: Rs 649.4, P/E: 10.9)Jain Irrigation (CMP: Rs 567, P/E: 33.4)

Agro-chemicals manufacturer Rallies and fertilisers maker Coromandal are likely to be beneficiaries of UPA's food for all initatives. Jain Irrigation is well positioned to be benefited from the government's plan to bring more farm areas under micro irrigation.

• STEEL SECTOR

The domestic steel demand seems to be intact and India is one of those few countries in the world which is expected to register a growth rate of 5-6 %. The UPA govt. initiatives in different rural development programs and higher spends on infrastructure would definitely boost the domestic steel demand.

RECOMMENDED STOCKS TO BUY FROM STEEL SECTOR

Sail (CMP: Rs 158.5, P/E: 9.3)

Sail is focused on domestic market where the demand is expected to remain stable. It has zero debt, no foreign operations, not expanded its capacity recently and is partially integrated. All these factors augur well for Sail during such challenging times.

• RETAIL SECTOR

The retail sector's wait for opening up of the FDI route for foreign retailers seems to be coming to an end. As the UPA government would no longer need the support of the Left front, which was opposing the change in the FDI policy and allowing foreign players into the domestic industry, retail sector seems to be poised for growth.

RECOMMENDED STOCKS TO BUY FROM RETAIL SECTOR

Pantaloon (CMP: Rs 300.4, P/E: 38.5)

Being the largest player, Pantaloon Retail would benefit with the change in the FDI policy. Not only would this increase the fund flow into the sector but also help the industry gain from the experience of some of the established international player.

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Indian bureaucracy : worst in Asia

A POLL of expatriates working in 12 Asian countries put Singapore on top for bureaucratic efficiency. This is the second consecutive year that Singapore makes it to top of the list. The survey was conducted by Hong Kong-based Political and Economic Risk Consultancy (PERC).

Singapore had the most efficient bureaucrats, although they tended to be unhelpful when things went wrong it was revealed in the 12-page report which stated - “during difficult times - or when mistakes are made that reflect badly on the system - there is a tendency among bureaucrats to circle the wagons in ways that lack transparency and make accountability difficult.”

The survey ranked India lowest – with the least efficient bureaucracy.

The report stated that engaging with India's civil servants was “slow and painful.” The report went on to add about India's bureaucracy - “they are a power centre in their own right at both the national and state levels, and are extremely resistant to reform that affects them or the way they go about their duties”.

Thailand came third in the report which went on to say that in spite of the country's recent troubles, “respondents to our survey were impressed with the way Thai civil servants have been carrying out their duties”. But the report also stated that corruption presented the greatest difficulties for Thai residents.Hong Kong came second in the ranking while China ranked ninth.

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Indian Industries that will do well in recession

AS EVERY business sector is affected by present global crisis and everybody is talking of slow down in business, still in India there are few sectors which will grow in this adverse situation. Lets have a look.

• Food

No one can survive without basic food material like milk, vegetables and drinking water. Food processing companies will not be affected much and rather will earn profits by increasing the prices. These are the basic needs which we as a common man can not produce by our self.

According to Ministry of Food Processing Industry (MFPI), the food processing industry in India was seeing growth even as the world was facing economic recession. According to the minister, the industry is presently growing at 14 per cent against six to seven per cent growth in 2003–04.The Indian food market is estimated at over US$ 182 billion and accounts for about two thirds of the total Indian retail market.

Further, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025

• Railway

As the aviation sector has been affect much badly and resulting in sharp rise in the air ticket rates the frequent travellers will prefer railways to cut the cost of travelling and this will result in increased traffic in railways and long queues at railway booking counters. The freight traffic of Indian Railways has continued to grow in the last few months, albeit at slow pace, indicating only marginal impact of the global recession on the Indian economy.

The railways registered 13.87 per cent growth in revenue to Rs 57,863.90 crore in the first nine months ended December 31, 2008. While total earnings from freight increased by 14.53 per cent at Rs 39,085.22 crore during the period, passenger revenue earnings were up 11.81 per cent at Rs 16,242.44 crore. The railways have enhanced freight revenue by increasing its axle loading, improving customer services and adopting an innovative pricing strategy.

• PSU Banks

As seen in the private sector much of the job cuts due to global slowdown, its the public sector undertaking (PSU) banks which gained much confidence due to job safety and security. More and more people are likely to turn towards government institutions, particularly banks in the quest for safety and security.

A report "Opportunities in Indian Banking Sector", by market research company, RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.

• Education

As education is considered as the basic necessity and in India it is seen as a long term investment by parents and with respect to the demand still there is a huge supply gap. The craze to study in foreign university among the Indian youth still alive which will prompt foreign education institute to target India provided vast young population willing to join.

We will see more and more foreign educational institutions coming up in India in recent coming years.Huge government as well as private investment is likely to flow into the Indian educational system. D E Shaw, a US$ 36 billion, global private equity firm is planning to invest around US$ 200 million in the Indian education sector.

• Telecom

People will not stop to communicate with each other due to global crises rather it has been seen that it will increase much particularly with mobile communication. With cheap cell phones available in the Indian market and cheaper call rates, the sector has become the necessity and primary need of everyday life.

Telecom sector, according to industry estimates, year 2008 started with a subscriber base of 228 million and will likely to end with a subscriber base of 332 million – a full century. The telecom industry expects to add at least another 90 million subscribers in 2009 despite of recession. The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.

• IT

Recent news shown that Indian IT sector will grow 30 to 40 per cent next year. And on the other side to survive in current slowdown, industries have to decrease the cost and for that they will resort to customised IT solutions which will further boost up the software solution demand.India is fast becoming a hot destination for outsourced e-publishing work.

As per a Confederation of Indian Industry (CII) report, the industry is growing at an annual rate of 35 per cent and India’s outsourcing opportunities in the value-added and core services such as copy editing, project management, indexing, media services and content deployment will help make the publishing BPO industry worth US$ 1.46 billion by 2010.

• Health care

India in case of health care facilities still lakes the adequate supply. In health care sector also there is huge gap between demand and supply at all the levels of society. Still there are so many urban areas were you could hardly find any multi specialty hospital. And in case of metros the market sentiments itself created a need of psychological consultation. Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017. The healthcare industry is interestingly poised as it strives to emerge as a global hub due to the distinct advantages it enjoys in clinical excellence and low costs.

• Luxury products

The high and affluent class of society will not be affected much by this global crises even if their worth is reduced significantly. They will not change their lifestyle and will not stop spending on luxurious goods. So luxurious product market will not be affected and in fact to maintain the lifestyle those affluent will spend more for it. Luxury car makers are pouring in to woo the nouveau riche (Audi, BMW are the most recent entrants).

• M&A & Marketing Consultants

As in the current business slow down survival will be the main focus, the marketing and management consultants will be called for to reduce the costs and to show the ways to survive and stay in market. Others may join hands to fight with this situation together will call for the Marketing & M&A consultants. In a booming market there are growth strategies and M&A opportunities to advise on.

When businesses are cutting back, consultancies will be right there to help clients decide where to wield the axe. According to Ministry of Commerce and Industry’s estimation, the current size of consulting industry in India is about Rs 10000 crores including exports and is expected to grow further at a CAGR of aproximately 25 per cent in next few years.

• Media and Entertainment

In current bad times, where people are losing jobs and getting enough time to watch TV, they will seek entertainment at home and hence advertising revenues will increase for the commercial channels. Also businesses like production of religious texts and religious materials, religious channels will do well. The TRP of religious channels will increase compare to the other entertaining/commercial channels.

According to a report published by the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian M&E industry is expected to grow at a compound annual growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012. According to the PWC report, the television industry was worth US$ 5. 48 billion in 2007, recording a growth of 18 per cent over 2006. It is further likely to grow by 22 per cent over the next five years and be worth US$ 12. 34 billion by 2012.

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Forex reserves up

Forex reserves increased by USD 1,667 million to touch USD 262,306 billion as on May 29, 2009, mainly due to rise in foreign currency and assets collections on a weekly basis.As per the weekly statistical supplement of the Reserve Bank of India (RBI) released on Jun. 5, 2009, foreign currency assets rose by USD 1,291 million to stand at USD 251,456 million.

During the same period, the reserve position in the International Monetary Fund (IMF) increased by USD 3 million to stand at USD 1,245 million. The gold reserves increased by USD 373 million to stand at USD 9,604 million.Foreign currency assets expressed in USD include the effect of appreciation or depreciation on non-US currencies (such as Euro, Sterling and Yen) held in reserves.

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