BHARTI AIRTEL ??

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has a diverse business portfolio and has created global brands in the telecommunication sector. Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles.

The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) –

1) Mobile Services

2) Airtel Telemedia Services

3) Enterprise Services

To talk about the Bharti price fall, it will not stop as long as it doesn’t take any decision to reply TATA DoCoMo`s 1ps/Sec Tarif. There would be occasional rallies after the results. I feel that Relcom also will travel along with Airtel to find new bottom as their new strategy is not the answer for DoCoMo. Airtel share holder can keep hope only upto the results.

Bharti would be timing of the announcement of new tariff which can match DoCoMo`s 1ps/sec plan.

There are two things to be addressed.

1) Is to retain the customer

2) Is to announce the Tariff (it can offer only 1ps/sec billing other wise customer will not take it.).

Both are complimentary one can not be without the other.

Bharti in particular can go down to Rs.310 and from there probably some buying support is likely to emerge. Start buying Bharti from current price and accumulate for every 5 to 10% dip. Bharti will do good business by adding more and more customers even with lot of competition in the sector. If one second pulse rate implemented good number of customers will be added to Bharti.

I think a stock like Bharti from these levels can easily give you a return of 25-30% in next 12-15 months.

Markets @ current levels

At this point of time i would be advising clients to be cautious. The rally may last as long as liquidity lasts but investors should be cautious. As of now there is no clear picture over what earnings growth in FY11 would be, so it was difficult to arrive at a fair value for the market based on earnings expectations.

If we look at the valuations,they are at the higher end. We are already trading at about 21-22 times. Markets have been able to meaningfully sustain above these levels at 2000 and early 2008. So,from a valuation perspective, the markets are now in a probably euphoric zone, it’s only liquidity or any of the unexpected positive news flows which could drive this market higher from here.

On FII and DII front, FIIs are buying and DIIs are not selling in this rally.There is a lot of momentum in the market. The volumes have steadily picked up these last few days and the breadth continues to be good. DIIs are not selling in this rally as they are following the insurance company's trend. Insurance company's sell when FIIs continue to buy and eventually the market comes down.

The SEBI Move to do away with Entry Load

SEBI in its eagerness to help mutual fund investors has done away with entry loads. The MF industry, which also includes 70,000-strong distribution personnel, is unhappy over the SEBI move to do away with entry load on fund schemes. The new regulations will hurt MF distributors badly, and to some extent, the industry too.

I believe that this move would ensure more transparency in the system. We have to wait and watch how this will be implemented.

If advisors have to collect two cheques from investors it may be a little tougher.

We will see many IFAs or agents moving out of this field as this will become less profitable in the short run. It will kill a large number of distributors who were making a living selling mutual fund products and contributing to the growth of this industry. The retail distributors will badly get affected by this move.

I think there would be a different model coming up with fee-based advice. The financial advisor can no longer remain a salesman. He now needs to be a professional who is qualified and knowledgeable to give advice on investments and linking it to various components of personal finance. He needs to upgrade his knowledge by undergoing certification programs such as Certified Financial Planner (CFP). Only the advisors who acquire and upgrade their knowledge and skills will be able to deliver value for fee taken from clients.

LIQUID & LIQUID PLUS FUNDS

Liquid and liquid plus funds are short-term debt funds; they are different in a few aspects.

Investment tenure is the major differentiating factor between liquid and liquid plus funds. The debt instruments held by liquid plus funds have a longer tenure than liquid funds.

Liquid and liquid plus funds can be redeemed within a day. However, if liquid plus funds are redeemed within a specified period, there can be an exit load (the minimum investment tenure and the exit load vary across fund houses). On the other hand, there is no exit load on liquid funds.

In terms of tax implications, a dividend distribution tax of 28.33% is charged on liquid funds, whereas it’s 14.16% for liquid plus funds (in case of individual investors). Liquid plus funds pay lower dividend distribution tax as compared with liquid funds, which make them more attractive.

Liquid plus funds are riskier. This is mainly due to two reasons a) liquid plus funds hold investments that have a higher maturity and b) there is no limit on the mark-to-market (MTM) component of liquid plus funds.

A fine balance between risk and return and better tax efficiency is encouraging investors to favour liquid plus funds over liquid funds, Anybody with a slightly longer call preferred liquid plus schemes rather than liquid funds,

TAX Implication on Liquid & Liquid Plus Funds:

Capital Gains Taxation
		STCG		LTCG
Individual		As per the tax slab applicable for the investor		11.33% without indexation OR 22.66% with indexation
Corporate		33.99% (30%+10%+3%)		11.33% without indexation OR 22.66% with indexation
The above figures include the tax rate + surcharge + cess SOURCE:www.valueresearchonline.com

The good aspect with LTCG is that the income tax authorities give you the option to include the benefit of indexation. Indexation is the process by which inflation is taken into account when doing the tax calculation. This is excellent because it reduces the amount of capital gains and consequently the amount you end up paying as tax.

Exchange Traded Fund’s (ETFs) And Index Fund’s

We normally invest in an Active way or a Passive way. One of the most claims of Active investor is “I know more than the market.’ Passive investors simply take exposure to market via Indexing. They believe that market is usually right. Building a good portfolio is just not enough. You need to manage it properly and take the return. So, either you do this consistently on your own or ask some expert. 

Investing in Stocks requires time and effort. Investing in Mutual funds will make you feel like you have lost control over it as you have no control over the fund or fund manager.

It is difficult for an individual to outperform the market consistently over the medium to long term. None can consistently predict the direction of the market.

Surgeon and Pilots are skilled.

                                    Managers or Stock Pickers are also skilled,

                                                    Why doesn’t it repeat?

In order to invest sensibly we have to bring down Non Systematic Risk.

“Most Investors, both institutional and individual, will find the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees & expenses) delivered by the great majority of investment professionals.” – Warren Buffet 

It is more profitable to invest directly in an Index. Index funds allow you to invest in the index. Such funds invest their portfolios only in the stocks that contain a particular index. Performance of such funds will be same as the performance of the index. You have array of Index funds available from Mutual fund sector. Mutual fund sector offers you funds that not only mirror an index but whose units can be traded on the stock exchange in much the same way as common stocks. These funds are called Exchange Traded Fund’s or ETFs.

Benchmark Asset Management Company in December 2001 launched India’s first ETF, Nifty BeES .In India currently there are Equity and Debt market ETFs. Global ETF markets have grown rapidly. The US remains the world’s largest ETF marketplace, followed by Europe.

ETFs are perfect medium to execute strategic asset allocation for long term portfolios.

STARTING INSURANCE PLANNING EARLY

Insurance should be a part of the Portfolio. Starting to plan for Insurance at the early stage is always better. Delay in Insurance planning leads to expensive premium. The premium that is age specific will vary and go high as we grow older.

There is a huge need of Insurance cover at younger age also. The individual has to cover himself as he has responsibility towards his family and society.

At the earliest first take a Term Cover and then move into ULIP’s, Pension or Endowment plans etc.

The duration of the plan i.e.) Term also matters in term of building corpus. Longer the Term, more the benefit. Power of compounding will work better in longer term. Instead of starting late its better to start early.

Treat Insurance as an expense which mandatorily or compulsorily to be taken.

Manual Switch gives the Best of Averaging the Price

Though market has fallen steeply it is dangerous to invest fully or in one shot into Equity Mutual funds. Steadily increase exposure to Equity Mutual funds by way of Switching from Debt to Equity at different price levels.

Initially investors has to invest in a Debt fund and then transfer amount to designated Equity scheme whenever they see a fall in the price. Investors should note that all valid transfer requisitions from one scheme to other would be treated as Switch out / redemption and switch in / subscription transactions at the applicable NAVs of the two schemes will be reflected in the number of units allotted. Investors have to also look into eligibility of the schemes which will allow them to Switch from Debt to Equity. Please read the offer document of the transferee scheme carefully before investing.

By doing a manual switch when there is a fall in the price will give more advantage in averaging the price than the Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) or Switch Plans. Manual Switch will allow investors to have control over the entry price in Equity schemes and as such will give the best of averaging the price.

In the current market condition it is better to rebalance the allocation systematically in favour of Equity. Investing in Debt and switching slowly to Equity will give best of times of both Debt & Equity.