Category: Excerpts

Says Mehraboon Irani, head of the private client group business at Nirmal Bang Securities: “The only factor the market looks forward to is corporate earnings. Now, it is going down in the minds of markets that earnings are not going to improve in the next two to three quarters. What has happened is that analysts, after elections last year, projected a sharp recovery in earnings. Whether things improve in FY15-16 or in FY16-17 is under question. So, valuations have risen ahead of the earnings. The consensus view is that the March quarter numbers will also not be good.”

Among other things, Irani says the market is looking at passing of important legislation by Parliament. “Third is the dollar strength. Fourth is the US interest rate cut, which I think will not happen in 2015. With not many positive triggers and some negative triggers, the markets are likely to correct,” he says.
While the jury is out over when the US Fed will take its first step on rates, certainty over a delayed pick-up in earnings is slowly sinking in. That could trigger a sell-off or at least lead to under-performance of stocks riding the hope rally.

Hence, investors would be wise in being selective while picking stocks. The fact that the markets are sensing many stocks have run up without reason can also be seen in the unwinding across counters. A large number are quoting at prices below the levels in September last year, says Irani.

“So, it is more important to focus on stocks with high earnings growth and reasonable valuations. That’s also one reason why many such stocks are getting expensive,” says Irani. he adds that even as the Nifty will be higher a year down the line, there will be stocks that will be lower than today’s. That would apply to half the market.-from BS

Being a good investor is not easy. It’s incredibly hard work, and it takes a gigantic toll on a person emotionally. Whenever you hear a story about someone making a lot of money in the market, don’t suspend your disbelief. Most of the time, the story is too good to be true.

Back when I was on the floor, we all heard about a guy in one pit that was a miraculously incredible trader. Turns out he had a buzzer in his pocket. One of the largest order fillers in the pit would buzz him when he was buying. I have heard other stories about people making a lot of money, but usually there is a catch. They had a line on some inside information no one else knew about. Or, they controlled the order flow, and thus were able to take cues from it. Or, they had a back room deal with someone somewhere.

There are true stories where people undertook a lot of risk and did make a lot of money. I know more than a handful of people that did it. But, most people that invest for a living don’t make it all at once. They make it over years and years. They don’t have huge winning years, and they don’t have huge losing years. Warren Buffett’s return over time is massive. But, pick any one year out of the bunch and it’s not that much different than the others. It’s the cumulative effect and compounding effect of doing well each year. As an investors business matures, they can take bigger shots-only because they can withstand the downside if it all goes to hell.-wrote Jeff Carter

• 1998: Yashwant Sinha moots opening up insurance sector, creation of IRDA in NDA’s first budget.

• IRDA Bill goes to Standing Committee.

• Sinha moots 49 per cent foreign investment—26 FDI+23 FII

• 1999: Congress—post Antony Committee—forces cap of 26 per cent in IRDA Act.

• 2004: Congress comes to power.

P Chidambaram announces hiking FDI in insurance to 49 per cent.

• Left in UPA I and TMC and DMK (members of NDA that passed IRDA Act) in UPA II oppose it.

• 2005: Law Commission and IRDA back hike in foreign equity/ownership.

• 2008: Bill introduced in Rajya Sabha. 2009 Bill referred to Standing Committee of Finance.

• 2011: Standing Committee says “a greater role for foreign capital in insurance sector may not have the desired impact” and that “increased role of foreign capital may lead to the possibility of exposing the economy to vulnerabilities”. Chairman of Committee: Yashwant Sinha.

• December 2014: Congress and BJP agree to agree.

• March 2015: Jayant Sinha successfully pilots Insurance Laws Amendment Act.

• Foreign investment hiked to 49 per cent—26FDI + 23 FII—exactly as in the 1998 draft.

Think about it. It took a whole generation—from father to son—for this piece of reforms to come through.–from IE