Investing in Gold ETFs: The article focuses on gold ETFs in India and their rising popularity among retail investors.

Investing in Gold ETFs: The article focuses on gold ETFs in India and their rising popularity among retail investors.

Power Grid FPO price band fixed at Rs. 85-90

The government today fixed price band at Rs. 85-90 per share for about Rs. 7,600 crore (Rs. 76 billion) follow-on public offer (FPO) of state-run transmission company Power Grid Corporation of India. "The price band for PowerGrid has been fixed between Rs. 85-90," Power Minister Sushilkumar Shinde said after meeting of Group of Ministers here. Retail investors and employees of the company will get a 5% discount.

The FPO comprises over 84 crore (84,17,68,246) equity shares of Rs. 10 each constituting 20 per cent of existing paid-up capital. At the upper end of the price band, the issue will fetch up to Rs. 7,600 crore.

The follow-on public offer of the company hits the market on November 9. The bid closes on November 11 for institutional investors and on November 12 for retail and non-institutional bidders.

The company plans to raise 10 per cent fresh equity, while the government is likely to offload 10 per cent of its 86.36 per cent stake in PowerGrid. Besides disinvestment of the government stake, the fresh capital raising would be used for part funding investment requirement of about Rs. 58,000 crore (Rs. 580 billion) of the PSU.

The PSU has already tied up 86 per cent of the funds required for its capex plan and the remaining amount will be raised through the FPO and bonds issues. The company aims to augment transmission capacity to 23,400 MW in the current fiscal from 19,800 MW at present. On the transmission side, the company had been awarded Rs. 7,000 crore (Rs. 70 billion) worth of projects. It hopes to bag projects worth Rs. 14,000 crore (Rs. 140 billion) in FY'11.

The company had hit the capital market in October, 2007, with its maiden public offer. The government had divested 5 per cent of its stake in the company at that time.

Source: The Financial Express, November 7, 2010

LIC, IDFC to launch tax-free infra bonds this month

Life Insurance Corporation (LIC) and Infrastructure Development Finance Company (IDFC) are set to launch their tax-free infrastructure bonds this month, offering another option for investors looking for safe returns while opening up an avenue for companies, especially utilities, to raise long-term funds from these institutions.

Investors will get a tax relief on investments up to Rs. 20,000 in these infra bonds over and above the deduction of Rs. 100,000 from taxable income which is permitted if they put their money in equity-linked savings schemes (ELSS) of mutual funds, bank deposits with a tenure of five years or more, pension funds besides expenses on tuition fees.

Both LIC and IDFC are likely to tap the market to raise over Rs. 7,000 crore (Rs. 700 billion). Both the financial institutions are in the process of finalising their issue size and the details of the public bond offering, said officials involved with the process.

Retail investors should invest in these issuances. Though Rs. 20,000 is not a big amount, it will still add to the Rs. 100,000 that can be saved by an individual every year. The issuance will look even better if the proposed direct tax code kicks off and tax exemption limit moves up to Rs. 200,000, said Maneesh Kumar, Managing Director, Burgeon Wealth Advisors. These bonds will have a lock-in period of five years after which investors will be able to trade on them on the stock exchange. The yield on these bonds are capped to interest rates on government bonds (g-sec) of a similar maturity.

Investors will be surely interested in investing in these bonds. These papers would be bearing a tax-free coupon payout between 7.85 and 8.10%, which makes it attractive to hold till maturity. Being a retail product with a maximum investment cap of Rs. 20,000 (for tax exemptions) per tax-payer, these bonds will attract more applications of smaller values. This will enable several investors to participate in the issuances, said Vikas Jain, Head-Investment Banking, AK Capital Services.

Wealth managers said that this can be a good tool to build funds for long-term goals such as retirement. Recently, the government allowed LIC, IDFC and infrastructure non-banking finance companies to issue tax-free long-term infrastructure bonds in a bid to channelise household savings for developing the country's infrastructure.

According to the governments estimates, these bonds have the potential to raise close to $6.5 billion in FY 2010-11. Last month, Industrial Finance Corporation of India (IFCI) had launched its first series of tax-free infrastructure bonds for investors. Larsen & Toubro Infrastructure Finance is also likely to issue these bonds.

Source: The Economic Times, September 7, 2010

Investor Education: Exit MFs at right time for higher gains

Investing isn't just about picking the right funds and products. Unless you are able to maximise your returns by making the exit at the right time, you wouldn't be able to fully realise the fruits of your well-thought out investment plan. Even the best products are susceptible to the vagaries of the market and can make your investments look like duds in the short run. While timing the market isn't something that average investors are good at, one can cut losses, and benefit from market upswings by making exits at periodical intervals.

A systematic withdrawal plan (SWP) allows you to do just that. SWP is the opposite of systematic investment plan (SIP) and lets you to automatically redeem a predefined amount of your investments at regular intervals. With even dividends from diversified equity mutual funds (MFs) to be taxed at 5% under the new direct taxes code (DTC), investors can take the growth option and pull out the gains through an SWP.

"SWPs will become more popular after the DTC comes into effect as it is tax neutral (not much change in tax structure)", says R. Raja, Head - Products, UTI MF. "The biggest advantage with SWPs like SIPs is that it eliminates the risk of timing the market. Only if you try to time the market you lose. With SWPs you neither exit at the opportune moment nor at the inopportune time and by this you can average out your withdrawals (from the corpus)", he adds.

"SWP is a good way of disciplined profit booking. Just like one has an investment discipline (through SIPs), a discipline in selling is also necessary", says Lakshmi Iyer, Head (Fixed Income and Products ), Kotak Mahindra MF.
"However, SWPs, unlike SIPs, are not widely used by investors because they are more used to redeeming their units as and when they want", she says. But inert investors may hold on to the gains and cash out at the wrong time leading to losses, say observers. An SWP would help an investor to rebalance the portfolio and reallocate cash to other efficient asset classes depending on market conditions, they say.

But it has its downside as well. SIPs and SWPs are not a sure recipe for success. They would lose out in a continuously falling market, says an industry official. With the markets trading within a band, one needs to be careful about exercising such options, say observers. The amount to be withdrawn through an SWP is based on an individuals requirements and the corpus which is invested.

Source: The Times of India, September 7, 2010

7 common investing mistakes you must avoid

We all make mistakes, don't we? Some mistakes are minor that you get a second chance to make amends. However, there are some mistakes that will prove to be very, very costly and cannot be easily amended.

Investment is one such tricky area where you just cannot afford to go wrong. So what should you do before making an investment? Or do you know what the most common mistakes that you should avoid when making an investment? Well, here's a list of the seven common investing mistakes that you should avoid at any cost.

1. Confusing between trading and investing
This is perhaps the most basic confusion that you should avoid, lest you make big losses and lose the confidence to try again: the confusion between trading and investing. Trading is something that you do without much planning or research. That is, you are said to be trading when you buy and sell stocks and mutual funds at will. Frankly speaking, trading might not help you build long-term wealth but could bring good money to your broker. So it is important to understand the basic differences between trading and investing before taking the plunge. Investing takes a lot more research and well-thought out planning in the different avenues of the investment. Your investment amount, your investment goal, your risk appetite, the present market conditions and some basic studies about the future of the markets and many other factors go into making the best investment strategy for you.

2. Taking very conservative stand
Most people prefer to take a very conservative stand and invest in traditional products like bank deposits, public provident fund (PPF) and so on. Their argument is that the traditional products ensure guaranteed returns though they are comparatively lower than returns from stocks or mutual funds or equities. However, a good investment is not only about guaranteed returns but about real returns. Real returns are returns post inflation. And it is always better to calculate these real returns with an expert's help considering the complexities involved in today's economic scenario especially inflation.

3. Taking very aggressive stand
Not taking a very conservative stand doesn't mean you should play aggressive in the markets. An investor is bound to lose money even if he chooses to take a very aggressive stand by investing his money in high risk avenues such as equities without even taking enough care to understand how they work. The middle path is always better so that you can always make changes to your investment basket according to market conditions.

4. Holding on to the dud stocks
This is one of the most common mistakes some investors make, holding on to the dud stocks. A dud stocks need not necessarily mean only non-performing stocks; it could also mean purchasing stocks of unheard companies. Never buy stocks of unheard companies even if they are doing well while you are planning to buy them. It could well be just a short term stint because these unheard companies never have in them the thing to perform well on a long term and their stocks might soon turn to be duds. There are many instances of such companies and their stocks turning dud over a period of time. Hence, it is important to invest in performing stocks, and at the same time have a backing from a good fund manager. For example, you could invest regularly in small amounts through Systematic Investment Plans (SIP) and make money by holding on to them for a long term.

5. Asset allocation holds the key
Your investment basket should be filled with the right type of assets for good long term returns. And remember to fine tune the basket at regular intervals depending on how the market behaves and in line with your risk appetite and financial goals. Improper asset allocation like investing in too much of debt for the long term or irregular investments in equity for the coming quarters could put you in an awkward position and leave you with no or little returns.

6. Timing the market
This is one area where even the experts fumble. Markets are highly unpredictable even in the short to medium terms. Though there are some parameters to predict the market like the changes to the country's socio, economic, political and business spectrums, there is no fixed rule to say how markets would react to these turn of events. Hence, it is advisable to stay away from reading too much into such parameters while timing the markets. Instead, you could go in for a closely controlled investment strategy that could help you make money in the long term.

7. Overconfidence
Ask the long-term players in the markets and they will perhaps warn you against being overconfident with recent successes. There is nothing wrong in hoping for the best times but overconfidence is something an investor should do away with. It is important to understand that your recent successes in the markets could have been due to many 'hidden' factors that might have escaped your attention. Overconfidence in your so called 'perfect management of portfolio' might spell trouble and you might end up losing money.

Avoid these common mistakes at any cost. After all, a good beginning is half the battle.

Source: http://www.rediff.com/, September 6, 2010

Slew of IPOs likely to hit Dalal Street in September

People planning to invest money in primary market would have a number of choices to park their savings this month, as about a dozen of companies are expected to bring out their IPOs in September. As many as 11 small to medium scale companies, including tutorial service provider Career Point and entertainment and media firm Eros International, are preparing to launch their initial public offerings this month, merchant banking sources told PTI.

The companies, which are planning to come out with their IPOs include Indosolar, Commercial Engineers, VA Tech Wabag, Ashoka Buildcon, Electrosteel, You Broadband and BS Transcom. "All these companies are trying to hit the market before September because otherwise they will have to re-file the June quarter financial results with the capital market regulator Sebi. Till September, they can go with March quarter financial results", said a person involved in a number of these IPOs. However, independently, these firms could not be reached for comments on their expected time frame to hit market.

"The huge response received by several issues in recent times is also an encouraging factor for these companies to cash in the opportunity", said a merchant banker. Recently, the public issues of a number of entities including SKS Microfinance, Prakash Steelage Ltd. and Gujarat Pipavav Port Ltd. got huge response from investors and were oversubscribed. Listing of these firms was also stellar. The follow-on public offer of the state-run Engineers India Ltd. has also received a robust demand from investors.

Corporate India raised over Rs. 47,800 crore through the public offers during the fiscal 2009-2010, a period during which the stock market benchmark Sensex gave a handsome return of over 80 per cent. Apart from some big initial public offers such as that of JSW Energy and Adani Power, the fiscal also saw divestment of the government's stake in NMDC and NTPC through the follow -on offers. According to an analysis, about 44 companies -- including PSUs -- raised Rs. 47,867 crore during the April 2009 to March 31, 2010 period.

Source: The Economic Times, September 6, 2010

CRISIL assigns top rating to Coal India IPO

Rating agency, CRISIL, on Friday said that it has assigned a CRISIL IPO Grade 5/5 (five-on-five) to the proposed initial public offer (IPO) of state-run Coal India Ltd (Coal India). This grade indicates that the fundamentals of the IPO are 'strong', a CRISIL statement said.

State-owned Coal India Ltd (CIL), the country's largest coal mining company, is planning to raise Rs. 13,000-crore (Rs. 130 billion) through an IPO to fund the infrastructure projects in the country. This will be the largest IPO in the Indian capital market after Reliance Power's offer in January 2008 through which the company had raised Rs. 11,500 crore (Rs. 115 billion). The Union Cabinet has approved a divestment of 10 per cent of Government stake in the Navratna PSU. The Centre currently holds all the equity in the company. The company will offload around 630-million shares through a book-building process which is to be launched from October 18 to 21.

Coal India, the largest producer of coal in the world has the largest resources of 64.8-billion tonnes. In FY 10, it produced 431-million tonnes of coal, which accounted for 81 per cent of the coal production in India. The company owns and operates 471 coal mines --- 163 are open cast, 273 are underground and the rest are mixed. Coal production is carried out by the seven subsidiaries of the company.

Source: The Economic Times, September 3, 2010