India – Victim of collateral damage again!

S&P downgrades US credit rating

In a now historical move, global credit ratings agency, Standard & Poor (S&P), downgraded the US credit rating by a notch from AAA to AA+ just a few days after two other global credit ratings agencies, Fitch and Moody’s had affirmed the US credit rating at AAA but with a warning of a downgrade possibility in the future if the US deficit does not come under control.

S&P, however, has taken a tougher stance as is reflected in the statement released by the agency, which read, “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”

Implications for the US

A ratings downgrade would typically lead to an increase in borrowing costs for the country, as well as for its corporates and the consumers. Thus, this event would not only add to the expenditure bill of the US government and put pressure on the deficit of the country, which is already facing debt problems, but would also affect the spending pattern of US consumers, which would ultimately be reflected in the form of slower growth of the US GDP.

Moreover, more than this event itself, it is the timing of the event that could create some problems for the US as the economic recovery was already in question (with a certain faction of the market even predicting a recession soon), and this move would only increase the challenges for the government to prevent another recession.

However, it seems unlikely that based on this event, the world would take a harsh view towards the US immediately in the near-term as is seemingly evident from the fact that major economies like Japan, China and Australia have already affirmed their faith in US treasuries despite the downgrade. Moreover, it needs to be borne in mind that two other global ratings agencies, Fitch and Moody’s, have maintained their AAA rating though with a negative watch.

Implications for India

As is well known, India is a domestic consumption story built around its 1.2 billion people. Exports form 15-20% of the country’s GDP and within this too; the Middle East and other Asian nations are important contributors with less than 50% of exports being contributed by the US and the European Union. Thus, the impact of a US slowdown is expected to be limited and temporary in nature on the Indian economy. To put this in perspective, post the sub-prime crisis in 2008, while India’s GDP was affected for a couple of quarters in 2HFY2009 wherein the quarterly GDP growth went below the 6% mark, it bounced back equally sharply and within the next two quarters it was back above the 8% growth mark.

Further, now in the backdrop of this US event and interest rates in India at a decade high, a silver lining is that it may force the RBI to re-think its strategy of raising interest rates further, if over the next few days/weeks visible signs emerge that the US growth is in further jeopardy and consequently India’s growth could get affected to a certain extent in the short-term. Note, any pause in interest rate hike by the RBI will be a huge relief to the market and a big positive for the Indian economy. Further, relatively, India’s resilience and economic strength in a weakening global environment will get visibly highlighted in the years to come and will lead to some shift in the global investment pattern in favour of India.

Implications for the Indian stock market

Akin to 2008, wherein India was not a party to the sub-prime crisis, but was affected because it was financially integrated with the world, this time too, some repercussions of this event could be felt in India too, especially on the FDI and FII fronts as US is an important source of liquidity.

Thus, considering the FII inflow angle, the Indian stock market may witness some correction over the next few days/weeks as jittery FIIs turn risk averse. However, the extent of nervousness is debatable as the possibility of a US credit downgrade was being built into the global markets as is evident from the 5-10% witnessed across equity markets this week, especially in the US and Europe. Moreover, even in the past, while Indian stockmarkets have corrected sharply over short periods of time because of the high dependence on FII flows, the recovery has been equally swift. While historical trends are no guarantee of replications in the future, it is important to bear in mind the value proposition that Indian equities offer.

Notably, while historically India Inc. has registered a Net Profit CAGR of over 15%, even if we assume that the growth over the next couple of years would be curtailed, still, at the current level of 17,300 the Sensex is trading at about 13x FY2013E EPS, which is below its historical valuation of about 15x. Moreover, every correction will only make Indian equities more attractive for medium-to-long-term investors. Thus, one must make selective investments into Indian equities and considering the volatile times prevalent, a systematic investment approach is all the more advisable.

Dear All,
Please note that L&T Finance Holdings Limited IPO will open for subscription from Wednesday ie 27th July, 2011  and  closes on Friday ,29th July, 2011

L&T Finance Holdings Limited -Issue Details

Issue Program: –             Issue Opens on – Wednesday ,  27th July, 2011
Issue Closes on :–           Friday, 29th July, 2011

Price Band: –                  Rs. 51/- to Rs. 59/-

BID lot:-                          100 Equity Shares & in multiples thereof

Clients can  apply online through www.rsec.co.in

This is heads-up.  Some details below. Wait for more….

• Large IPO – upwards of 1500 crs – largest for this year till date.
• 3 weeks back, pre-IPO placement of 330 crs took place @ 55/a share to US PE Capital Interest.
• IPO period – July 27th – 29th
• IPO band will be known on Monday, July 25th

Please keep  updated and ready to apply on this one.

A lock in period refers to the period under which a person cannot sell his or her shares. This is generally a state or condition, which comes along with ESOP or employee stock ownership plan. Under this a person who has been granted some stocks of the company cannot sell them immediately. He can either sell them in lots after the lapse of fixed periods of time or all at once depending on the company policy.  The simple reason of these banks for enforcing the lock in periods is for them to have more than enough time and stable money to be invested and get interest return.

Moreover, lock-in period is also defined as the period after investment in fresh units during which the investor cannot redeem the units.   Any client therefore should see to it that whatever investment he put into the back will never be taken or withdrawn.  Moreover, lock-in period refers to a predetermined number of years that the borrower is eventually penalized for if he/she changes the terms of the contract either by cancellation, pre-payment or conversion.  This simply means to say that before entering into a lock-in period the clients would be informed about the particular number of years where the money invested will be frozen for a certain number of years.

Another basic concept of lock-in period is this: it is a time period for which investors must keep their money invested in an account or investment fund. Withdrawals within this period are either impossible or heavily penalized and thus expensive.  In short, clients cannot get their own invested money anytime otherwise if they badly need it or insist, they will be giving extra payment as a form of penalty.  However there is one example of a bank investment that has no lock-in period.  This is the Lowes Wealth Management’s account.  This is one instance when a bank investment does not require a lock-in period.

Furthermore, lock-in period implies: that during this is also the period from which a loan cannot be paid-off earlier than scheduled without incurring penalties. Its objective is to generate a certain minimum return on the sums advanced that covers the lender’s lending and loan administration expenses.  Secondly, a lock-in period means a period for which a lender agrees to hold steady the agreed upon interest rate on the loan irrespective of the market rate.

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As a conclusion, lock-in period which in fact referred to as time period, usually 30 to 60 days, a mortgage lender agrees to hold the mortgage rate and points payable by the borrower to the rate quoted when the application was taken. Also, a lock-in period is called a rate lock. It is not the same as a loan commitment although; some commitments may contain a lock-in provision. This protects the borrower against rate increases if interest rates rise before the loan closing takes place. Lenders may charge a flat fee or a percentage of the mortgage loan, or add a fraction of a percentage point to the loan’s interest rate.  In short, having knowledge about lock-in period can in fact help you manage your bank investment and also maximize all its benefits.

Investing in stock is not that easy as a pie.  You say you want to invest, but you don’t know where to start? This investing article walks beginners through a step by step process along the way to becoming a shareholder.

You must be asking this time, where shall I begin then with stock investment?  It’s a question we get a lot around here: How do I buy stocks? It sounds simple to experienced investors, but getting started can seem daunting and difficult. With this article, I’ll take new stock investors through each step of becoming a shareholder, a successful one at that.

What’s a stock? First, let me answer this question:
What is a share of stock?
Corporations sell shares of stock to raise their company’s cash to fund their operations. The first time that a company sells its shares is termed its initial public offering (IPO). Most companies make additional stock offerings from time to time to raise additional funds.

When you buy stock, you are buying in a way ownership in the underlying corporation. For example, if ABC Corporation has issued 100 shares, and you buy one share, then you have purchased a 1% ownership stake in ABC.

If for instance a corporation sells its shares, it doesn’t receive any direct benefit if its share price goes up further although its executives may hold shares and thus be motivated to try and increase the share price — hopefully by making the company more profitable.

The first step in buying shares is deciding who will help you buy them. The most likely middle-man is a stockbroker, of which there are two main types:
Full-service brokers provide financial planning and advice on selecting investments such as stocks and mutual funds. They usually have offices you can visit, and an individual broker is usually assigned to each customer. Full-service brokers are the more expensive way to buy shares. You’ll typically pay around $70 to buy or sell a batch of shares, compared to $20 or less with a so-called discount broker. That can be enough money well spent if you don’t have the time or interest required to manage your portfolio on your own.

The second type is discount brokers which caterto investors willing to do their own research and make their own investing decisions. Most don’t have local offices — they typically operate online or over the phone — and don’t give investing advice. Because their trading commissions are low, discount brokers are a good choice if you pick your own funds and stocks. Some brokers, straddle the line between full-service and discount, operating branch offices and offering some financial advice.

Moreover, there are two basic ways to invest in the stock market: You can buy stocks of individual corporations, or you can buy mutual funds.

Now what are mutual funds? Mutual funds invest the pooled funds of thousands of investors. By investing in mutual funds you gain the various benefits and advantages of professional management. Because most funds hold dozens, if not hundreds, of stocks in their portfolios, investing in funds also gives you automatic diversification.

That is an important advantage. Even if you’re a gifted stock-picker, inevitably something unexpected will happen that will sink the share price of one of your stocks. Such an event could be a disaster if you own only a few stocks, but would be no big deal for a mutual fund holding a hundred or so stocks.

Mutual funds often specialize in specific market niches, such as small companies, health-care stocks, fast-growing companies, etc. You can buy mutual-fund shares directly from a fund, which offer a variety of fund types — or through a stockbroker.

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In conclusion, investing for a stock could be very beneficial to you and for your future as you retire because this will surely give you more than enough money for all your retirement and post retirement needs.  Stock investment have a high return of investment thus you must not think twice of investing with stock for as long as you studied very carefully the ins and outs of doing this business.

Dear readers, this article is something that you need to understand and grab once you have the cash and the chance because, if eventually you get the ins and outs or the nitty gritty of doing this form of business, then you will reap a bountiful harvest, money wise, sooner or later than expected.

One of the most essential practices of trading, industry and monetary businesses is the so-called IPO.  IPO basically involves selling stocks a lot. Before we go further, let’s elaborate deeply what IPO means. It is aptly defined as an initial public offering, or an IPO, is the primary or the very first sale of stock by a certain company to the buying public. A company can generate money by deciding to get it either as a debt or equity. If the company did not issue equity to the public, then this is known as an IPO.

Usually every company may be categorized into two broad types: private and public.
A privately managed company has lesser shareholders and its owners do not necessarily have to tell much information about their company. Anyone can go out and build or incorporate a company: just place some money, file the precise needed legal documents and do exactly the reporting guidelines of your jurisdiction. Small businesses are mostly held privately. However, big companies can sometimes be private too.

Typically, it has never been a practice or even possible to buy a share in any private company. You may talk to them about investing, but they may not be obliged to sell you anything from their company. Public companies, on the other hand, may have sold at least a good part of their company to the public and eventually trade it on a stock exchange for better investment return. Hence, doing an IPO is similarly referred to as “going public.”

Public companies usually have hundreds or even thousands of shareholders and are therefore subject to strict rules and policies. They should have a board of directors and they should also report financial status every quarter. In the United States and most countries in the world, these public companies are required to report to the Securities and Exchange Commission (SEC). In other countries, public companies are managed by governing personalities or government officials similar to the SEC. From an investor’s vantage point, the most interesting part about a public company is the  fact that a stock is traded in an open market, just like any other commodity. If you have the needed cash, you can easily invest. The CEO may raise his eyebrows with your guts, but there’s nothing which he or she can do to stop you or anyone from buying stock.

But why go public?
Obviously, going public raises money, and usually a lot of it. Being traded publicly also opens many financial possibilities and doors:

• Due to the increased scrutiny, these public companies can usually take better rates and earnings when they issue debt.
• As long as there is a market demand, a public company may always issue more and more stock. Thus, mergers and other type of acquisitions are the easiest way to do because s these stocks can be issued as part and parcel of the deal.
• Trading in the public or open markets means transparency and liquidity. This makes it a possibility to implement other things such as employee stock ownership plans, which may aid in attracting big shot and top talents or investors.

Indeed, to be part of a major stock exchange carries within it a considerable amount of prestige. In the past years, only the private companies with strong foundations or background could qualify for an IPO and during those time it wasn’t easy to be listed.

Thanks to the internet boom which changed all this. Firms no longer need to have a strong track record in terms of financial and a solid history to go for public trading. Instead, IPOs were practiced by smaller businesses seeking to expand their source of bread and butter. There is obviously nothing wrong if you want to expand, but most of these companies had not actually made a profit and did not plan on becoming profitable any time soon. Founded on the so-called venture capital funding, they spent a lot of money trying to raise enough excitement in order to make it to the market before eventually burning through all their hard earned cash. In these scenarios, companies may then be suspected of doing an IPO merely in order to make the founders or CEO’s richer. This is referred to as an exit strategy, trying to imply that there’s no desire to stay put around and create more investment for shareholders. The IPO then in this case turn out to be the end of the road instead of being the beginning.

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As a conclusion, always remember: an IPO is just selling of stock. It is all about the sales job. If you can close deals with a lot of people to buy those shares or stocks in your company, then you can raise truly a lot of money.  The question now is, how reliable and witty as a sale person are you to make good in this business?  The answer is in your hands…Act now and get rich!

An initial public stock offering (IPO) referred to simply as an “offering” or “flotation”. Small and young companies usually issues common stock or shares for their capital to expand. This is also can be done by big privately-owned companies to trade publicly. Initial Public Offering is the first sale stock in public by small and privately-owned companies.
A company can earn money by issuing either equity or debt. If the company does not equity to public, it will be called IPO. If the company would go to the public, it has to hire and investment bank, a financial intermediary that could give assistance of an underwriting firm that helps to determine the type of security to issue, best offering price and time to bring it to market.
An IPO can be risky investment. For individual investor, it is tough to predict what the stocks or shares will do on its final day of trading and in the near future since there is often little historical date with which to analyze the company.
Most IPOs are of companies going through a transitory growth period, and they are subject to additional uncertainty regarding their future value.

QUOTE OF THE DAY:
An initial public stock offering (IPO) referred to simply as an “offering” or “flotation”.

CONCLUSION:
The public can get their shares in Initial Public Offer by having an account, which is traded every now and then, with one of many investment banks.

Online stock trading is a new trend that is making waves in the market. It maximizes your interaction with the daily activities in the Stock Market, while minimizing your risks since you can simply log on to get the latest developments.

or new investors interested in online trading, there are some simple guidelines you should make sure to follow to avoid increasing your risk factor. If you are a stock broker who has not yet made the transition to include online trading, it’s about time you do since this will be the trend and growing inclination for many years to come.

Most brokerage houses now offer online services. In fact, if you are resourceful enough, you can find some companies that offer a short one week orientation on how to enjoy the software they have, and tie you up with a broker who will be your guide on how to make profitable investments. Naturally, you will be expected to sign an agreement with them if you start to use their software.

One major advantage with the using the online services of a company is that the commission rate and fees are lower than the regular rate.

One problem with online trading is access to internet may sometimes be interrupted. In cases like these, you could end up with a loss or a missed opportunity. To avoid this, you should have a broker who can take up the slack right away with a phone call from you.

Other issues you should clear up before signing up with an online trading service are the fees, the deposit requirements, minimum account balance, and other services. From the start, it should be clear what all the possible fees are that could be charged to you, and how much they are. This way, you know exactly what you are getting into.

Many online trading firms also offer other services that could come in useful for you such as calculating services and research tools. However, if you are resourceful enough, you could find these online yourself, and not have to worry about additional charges.

Online trading is very exciting and intense. It takes practice to perfect stock market trading. If you are new, you should not try to experiment too much on your own – that is, unless it is all a game for you, and you are willing to lose a bundle. Otherwise, find a firm that has been in the business for a while, and not a fly-by-night online website that can disappear at the drop of a hat.

Signing up with an online firm is risky if they do not have a reputable land-based office to go to that is duly registered. Never trust an online trading firm that cannot produce legitimate papers on their legal status. This would be the worst situation you could ever find yourself in – investments that disappear all of a sudden, or stocks that are worthless or fake.

The problem with online transactions is that there are no online police to go after cyber criminals. More often than not, they get away with it. However, this should not discourage you from using online services. You just need to exercise caution and discernment, and you will do just fine.

QUOTE OF THE DAY:
“Online stock trading has gotten extremely popular over the past few years. Because of this growing popularity, there are a number of different companies that are offering trading services on the internet. If you don’t know what to look for it can be difficult to choose which option is the best for you. While all of the available options will allow you to trade stocks and bonds, there are various other items that you should pay close attention to as you make your choice.” – Kathy McBain

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CONCLUSION:
Like all business transactions, online stock market trading has its share of risks, As long as you are aware of them, as well as the methods of doing online trading, then you should have no problem. Make sure you tie up with a good, well-known firm that boasts of a fine reputation.

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No matter what women liberalists say, men have more guts to go out and take risks. Women tend to be more conservative – generally speaking. Thus, when it comes to the Stock Market, a man is more willing to make a gamble on a promising stock, while a woman would, on the average, prefer to buy the tried and tested stocks.

If you want to know more about the risk factors in the Stock Market, check out www.moneycentral.msn.com but read with an open mind since some tend to discourage investing in the Stock Market today, while others think it’s a great business opportunity.

Some people say that risk is part of the Stock Market. While there is some truth to that, it should not be overplayed to the point that it turn off possible investors with a weak heart. You know, the risk factor can be controlled to a great extent.

For one, if you make your decisions haphazardly, then you should just go down to your local casino, or sign up at an online casino because the odds are pretty much the same.

To make money in the stock market requires daily updates, and maybe even having a good software that would help you track down trends. There are several of these software that you can download from the internet – for a fee, of course.

If you do not have the dedication, then you should not handle your stocks. Hire a reliable and reputable stock broker who will do the legwork and homework for you.

In today’s volatile Stock Market, you need to be ready to lose a little because of the topsy turvy way the stocks are dancing. Of course, if you have a good stock investment, the losses will eventually change in your favor eventually. The prices could just be reactionary and not due to any problem with the corporation.

You should also have boundaries. Decide how much you are willing or ready to lose. Be ready to include the other expense factors in investments like taxes, rate of return, and length of time you plan to keep your money in that particular stock. You could consider diversification which means putting your investment in different stocks. Your broker cold probably give you his recommendations, at the same time, you could sit on your money for a few weeks before finally buying up the stocks that look most promising to you.

The advantages with buying different stocks is that you can lessen the risk factor since you have other options in case one of your investments takes a dive.

Whatever stock you decide to invest in, realize and accept that you cannot eliminate risks. They are part and parcel of the entire transaction. If you cannot handle the risk factor, then you should consider other options than the stock market. However, there are not many business ventures or investment portfolios that do not have any risk involved. Heck, anything you do – even crossing the street is risky nowadays.

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• What is Demat Account
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QUOTE OF THE DAY:
“When it comes to investing, risk counts as much as reward. Stocks generally have provided long-term gains, but the financial markets are still prone to slip-ups, corrections or even meltdowns. Past performance, as any astute investor can tell you, is no guarantee of future returns, and salvaging a ravaged portfolio is a lot harder than protecting one. If you’re stretching to make all you can from your portfolio, you could end up with a nasty shock . . . at least in the short run. The key is to become “risk-ready,” especially when the financial markets start to rock and roll.” – Lorayne Fiorillo

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CONCLUSION
If you can sleep well at night with the thought of investing your hard earned savings into the Stock Market, then you can handle the risk factor. If it keeps you awake at night, and stresses you during the day, then forget it. You’re not cut out for this kind of investment.

There are certain questions that every potential investor needs answered. It may seem peculiar for some to think that anyone would want to start investing in the Stock Market, but with the prices of certain stocks at an all-time low, it may actually be a perfect time to start investing, albeit wisely.

1) Stock – What is it really?
When you buy stock, you are buying a part of the company. One share equals one unit. Now a company may consist of as little as 20,000 units or as much 100 million units – naturally, this would depend on the value of the company. It generally follows that the more total shares a company has, the bigger it is.When you buy stock in the open market like the Stock Market, you are buying common shares. If you own enough common shares, you could end up seating in the Board and helping navigate the company. Of course, this is a very simplistic way of looking at it.

2) What is the difference between Common Stock and Preferred Stock?
If you want to be able to have the right to vote on major company issues, then you need to buy Common Stock. However, if your reason for buying shares is primarily to earn money, then the Preferred Stocks are right up your alley. Also, if for some reason, the company has to dissolve, the Preferred Stock holders get priority over the owners of Common Stocks.

3) How high are the risk factors in investing in the Stock Market?
Like in any investment, there are risks. In the Stock Market, the risk factors are no greater than in any other usual business investment. You really have to know which stocks to invest in, and which ones to stay away from. Naturally, the higher the risk, the bigger the potential revenue.

4) What influences the prices of the stocks?
Prices largely depend on supply and demand. The higher the demand, the higher the price. However, other than supply and demand, there are other factors that will affect price like a disaster in the country. It may be political, natural, or economical, and if these events are on a national scale, then definitely the stock market gets greatly affected.

5) How do you know whether your stocks are Class A or Class B?
Class A stocks are common stocks. They are the stocks you buy at the Stock Market. They carry a value of one unit each stock, or one unit share in the company. Class B stocks are stocks issued by the founders of the company to themselves to be able to effectively keep control of the company. Each Class B stock carries a value of 10 units or 10 votes per one Class B stock.

These are just some of the usual questions a new investor must ask because it would be foolish to try to enter any kind of investment on blind faith or lack of knowledge. It would be similar to gambling, in a way.

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QUOTE OF THE DAY
None of that changes the fact that the American economy is the most resilient and robust of any in the world. If any country is going to survive a massive economy crisis and go on to thrive, it is the United States. – Ken Little

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CONCLUSION:
If you plan to start investing in the Stock Market, you should have a solid foundation. This means basic knowledge, a good trustworthy stock broker, and means for keeping updated with the market trends and current events.

Do you have suggestions for improving the blog, or types of content you’d like to see more of? We’re all ears, so please feel free to leave us a comment below. It’s a brand new year, and we’re ready to get started!

Prospects at the Stock Market has turned 180 degrees in the past year, and we are still reeling from the aftershocks of a Stock Market that is still unstable and unpredictable. What now?

Of course, the real question bugging many investors is still what to do now that their assets are locked into stocks that are tripping the light fantastic with a rollercoaster ride that does not seem to be stopping. So, do you bite the bullet and just sell to become liquid, or do you hold off on selling in the hopes that the economy will start to look more positive?

Well, to be an idealist right now would be very chancy. Sure, things can only go up if you’ve really hit rock bottom. However, your best bet would be to analyze what stocks you have, and figure out which ones are the most promising. You should get an expert to help you here if you lack the experience and the necessary vital information only a licensed stock broker would have.

If you want, you could sell of some of your stocks but be ready to face certain losses. You can plan ahead and try to recoup those losses by retiring a little later in life, or finding a second source of income.

Most people bought stocks in the hopes that it would serve them well after they retire. Unfortunately, all those plans may have gone down the drain, in which case, if you are one these thousands caught in this kind of situation, then you will need to reassess your retirement plans.

One way to do that would be to keep those stocks that have the highest probability of making a good comeback, and waiting a little while to see how the rest move before unloading.

Never make impulsive decisions in selling stocks, since we should all be aware that the volatility of the Stock Market is extremely unpredictable. You could try re-investing some of your stocks in penny stocks which are low priced stocks that show a lot of promise. For this, you need to keep your eye on the news, and your eye to the ground. A little snippet in the newspaper could actually be a sign of a huge contract awarded to a small to medium sized company.

There are Stock Market software that you can find in the internet which will guide you on how the trends are in the Dow. If you are relatively new to the actual trading news, but have invested in stocks, then it would serve you well to find a trusted stock broker, or start learning the business.

This is the perfect opportunity to start getting your feet dirty with stock trading. Just be sure to exercise caution, and never act on impulse. You know that instinct or “feel” that some brokers claim to have? Sure, it may exist but if it isn’t backed by solid data, then you are doing nothing short of gambling away your investments.

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• What is Demat Account
• Basics of Fundamental Analysis

Quote of the Day:
When the stock market is in turmoil (for good or ill), investors need a strong filter to help them make good decisions. – Ken Little

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Conclusion:
Dealing with the rough and tumble scenario of the stock market can be very vexing for investors. It’s a case of seeing your money disappear, or dwindle in value. You can do more than sit and wait as the changes happen to save your investment. Get more involved with your stock investments. It’s the best way to protect your investments.

Do you have suggestions for improving the blog, or types of content you’d like to see more of? We’re all ears, so please feel free to leave us a comment below. It’s a brand new year, and we’re ready to get started!