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Monday,
September 24, 2001, Chandigarh, India
  
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Market crash: what to buy now
Inflation rises to 5 per cent
In the wonderland
of investment
Bank FD right choice |
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Change ‘consumer’ concept to ‘citizen-consumer’
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Market crash: what to buy now EVER since Black Tuesday (September 11, 2001), equity markets around the world have tumbled. Central banks of all countries have tried to stabilise the money and stock markets through various measures ranging from cutting the interest rate (U.S. Federal Reserve) to allowing banks to fund margin trading (our own Reserve Bank of India). But all these measures have proved to be futile. The Indian market also fell like a pack of cards and it has lost more than 18 per cent to close at 2600 last Friday. The reasons put forward by some sections of the investors for such a drastic fall have ranged from large-scale selling by the Foreign Institutional Investors (FIIs) to a further slowdown in the USA. The market valuations in the market have plummeted so much that the market capitalisation of some companies has fallen below their last year’s net profit. Prominent among the stocks that have lost heavily are Himachal Futuristic Communications (HFCL), Videocon International, Essar Shipping and RS Software. Not only equity markets but also the Foreign Exchange market and money market, have become so erratic that the RBI addressed the supply side problems by pumping in Rs 966 crore into the system through its open market purchases. The question on everyone’s mind today is whether one should invest in debt or in equity, or just stay liquid at a time when every market instrument seems to be so choppy. Obviously an answer to such a question is extremely difficult at an uncertain time when the corporate profits in most sectors are going down. As yet the market shows no signs of touching bottom. Minor rallies are followed by bigger falls and the sensex continues to lose its fizz. Investors are also slowly losing their faith in equities. After the crash of 1929, share prices did not bottom for as long as three years. The current fall in share prices during the last 16-17 months may continue for at least until the end of the year 2001. But given the fact that some of the stocks have been touching all-time lows and some premium-quality scrips are available at rock bottom prices. It would be wise to go bargain hunting. Here are some such scrips which have excellent fundamentals and sound managements. These scrips can be gradually accumulated in small lots with a strictly long-term perspective for above average returns. EPS — Earning per share (Rs) Div — Dividend Wockhardt Wockhardt is ranked as India's fifth largest pharmaceutical company with a market share of 2.37 per cent. The company has six brands in ORG's list of top 300 brands. It is also the only Pharma Company to launch two
successfully biotechnology products Biovac-B, the Hepatitis-B vaccine which is now the leader, and Epox (taken in cancer and kindney failure). Financially the company has been churning good numbers year after year. The company is available at much lesser discounting than its peers in the industry such as Ranbaxy and Cipla etc. In the coming days, once the investors realise the potential of the company, it should get a substantial re-rating. Gillette Gillette, once a darling of investors has been battered from its yearly high of Rs 1200 to the current price of Rs 252 due to the skewed merger ratio with Duracell and Wilkinson sword. But the shaving systems division, according to the management, will continue to grow at over 25 per cent per annum. More over all the negatives of merger seem to have been factored into the current price, and Rs 250 is not a very high price for the world's biggest shaving company. HDFC Bank The bank has a network of 131 branches and 253 on site and off site ATMs across the country. It plans to add 35 more branches in six months time and 100 more ATMs during the current financial year. During the lat financial year, the bank reported an income of Rs.1, 445 crore and a net profit of Rs.210.1 crore giving an of Rs.5.93. The bank, according to its management, will continue to grow at 25 per cent per annum. Giving the bank’s reputation of generating profits out of every retail product, it seems HDFC Bank will be the biggest of the banks being allowed to fund margin trading for shares. Hind Lever Hindustan Lever is the largest consumer product
company in India. HLL with its 115 brands enjoys a market leadership in soaps, detergents, colour cosmetics, ice creams and packed tea. The stock has fallen in tandem with the
market, but the business of the company in rural areas continues to grow at five times the urban market rate. The scrip, which has the heaviest weight in the BSE sensex, can safely be bought with a medium to long term perspective. ONGC Oil and Natural Gas Corporation (ONGC) is involved in the exploration and production of crude oil/natural gas in India with about 90 per cent market share. The company’s profitability will not be affected due to escalating crude oil prices as the company’s earnings are insulated from vagaries in global crude oil prices. Its downside is protected by the floor price guaranteed by the government. Moreover the stock is an excellent defensive stock in a falling market. Ranbaxy Ranbaxy is India’s premier domestic pharmaceutical company. Almost 47 per cent of its total pharmaceutical turnover and over 30 per cent of its formulation sales accrue from exports. The company has been working on three molecules and it is reported to have completed pre-clinical trials. The stock has appreciated by over 40 per cent in last couple of months due to massive FII buying. The scrip still looks decent at the current price of Rs 612. Tata Steel Tata Steel is India’s largest private sector steel producer commanding a 13 per cent domestic market share. The company ranks amongst the lowest cost steel producers in the world. All the negative have been factored into the stock price at the current rate. Moreover, in the long term the company stands to gain significantly from the step up in infrastructure spending and rising demand for automobile and other durable. Therefore, you may start accumulating the company’s shares with a two-three year perspective. Reliance Petroleum Reliance Petroleum is one of the world’s largest and best refiners. The refinery located at Jamnagar (Gujarat) has a capacity to refine and produce 27 million metric tonnes of petroleum products per annum. But in the post-deregulated scenario RPL will face a lot of challenges and refinery margins will come under pressure due to the oversupply of several products and the marketing margins will drive profitability. Though it is very early to predict how the market will shape up after the deregulation, one can trust the Reliance group to turn any challenge into opportunities. RPL at Rs. 25 definitely looks cheap. Godrej Consumer Products It is a demerged consumer product entity of the erstwhile Godrej Soaps. GCPL boasts of a lean balance sheet, professional management, powerful brands and a good distribution network. The company owns some well-known brands as Cinthol, Fairglow, Ezee and Godrej hair dye. The company derives 87 per cent of its turnover from consumer products, and this is growing at the rate of 25 per cent annum. Despite all the pluses, which the company has it, is still quoting at only seven times its earning.
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Inflation rises to 5 per cent
New Delhi, September 23 The inflation rate based on Wholesale Price Index for all commodities (Base 1993-94=100) rose from 4.99 per cent in the previous week mainly due to a whopping over 13 per cent rise in the price of vegetables. The index was 6.13 per cent a year ago. Primary articles became costlier by 0.2 per cent and manufactured items became cheaper by 0.1 per cent, while fuel products stood firm for the sixth week. PTI
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In the wonderland
of investment Q: 1) Deduction available u/s 80L for Assessment years 2001-02 & 2002-03. (2) I intend to avail loan of Rs 5 lakh from a bank for construction of a house for my own residence. I have bought the land during FY 2000-01; What deductions are/will be available to me with regard to acquisition cost of land, transfer cost (Stamps for Registration), repayment of loan & payment of interest thereon etc. for the A.Y. 2001-02, 2002-03 & subsequent years (3) Amount of deduction available u/s 88C to Junior Women for A.Y. 2002-03. An early favour of response at my above noted email address will enable me to finalise my Return for the current AY in time.
— Subodh Jain A: 1. 80L deduction is Rs 12,000 for AY 01-02 and Rs 9,000 for AY 02-03. There is some additional limit on interest from G-Sec, but normally these instruments are not available to you. 2. The deduction would be available only after the house is ready for occupation. No concessions are available on loan taken for purchase of only the land. 3. The rebate u/s 88C is Rs 5,000. Q: Does the interest accrued on a tax saving bond over three years (more than Rs 2,500 qualify for TDS? if yes, than what can be done to save that? — Gaurav Varshney A: Yes, TDS is applicable if the interest for the financial year exceeds Rs 2,500. Form 15-H declaring that your tax payable for the year is nill can be filed with the company to enable it not to apply the TDS. If you are a taxpayer, you cannot make such a declaration but here are other ways of saving the TDS. You should have specified your data clearly. Thank you for your reply of the query I made. I had bought IDBI infrastructure bonds for Rs 20,000/- for a period of three years at an annual rate of 10%, which are maturing in 2002, my query was that any TDS would be applicable on the interest accumulated till the time of maturity and if yes, what can be done to avoid that. The tax-saving bonds come in two flavours — 1) Regular interest paying bonds and 2) Bonds of Deep Discount in nature. TDS is applicable on the former on accrual basis. In the case of deep discount, the difference between the maturity value and the face value will be treated as interest income of the year in which the Bonds mature. TDS will be applied during that year. Q: These days with several banks going bankrupt the depositors find that a hitherto safest avenue has suddenly become quite risky. The only solace is that deposits upto Rs 1 lakh are covered by insurance. Incase a depositor desires to have full coverage he has to go to another bank or another branch of the same bank for additional deposits. It is unfortunate but true that when the incidence occurs the depositors may find that even this comfort is not available because the defaulting bank has not paid the required insurance premium. I have a suggestion. The insurance companies should allow a depositor to insure his deposits directly if he is willing to bear the cost of the premium. — A.D. Garud, Mumbai A: Excellent suggestion. I sincerely hope that the authorities look at this suggestion seriously and take prompt action. Now that the non-life insurance business is opened for private players, I am sure that this suggestion would be soon implemented. |
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Bank FD right choice Mr Ranjan Verma is a retired Senior Manager from Indian Overseas Bank. After 29 years of service he opted for VRS this year and is now a practising lawyer. A conservative investor, tax saving has been his priority while investing . He talks on how he planned his investments and is managing a regular monthly income almost equal to his salary even after his retirement. Previous investments Before retirement, I primarily focused on tax saving while investing money. On an annual basis I saved between Rs 70,000 and 80,000 of which around Rs 10,000 went to Provident Fund, around Rs 7,000 was the premium I paid for several insurance plans. I took money back policy, endowment policy and policies for my children. I also invested in infrastructural bonds, post office NSCs and PPF. All this helped me get the maximum tax rebate and the returns were also not bad, interest rates being good. It was during this period that we (his wife who also opted for VRS too was working) decided to buy a flat . Investment in gold also continued almost every year. At times I also invested in
equities, but this was not regular and I did not risk much money in the share market. VRS — a good option VRS definitely a good option and after calculating the benefits I decided to opt for pension after retirement. The gross amount I received was around Rs 20 lakh of which almost Rs 5 lakh our bank itself put in Indian Overseas Bank bonds where I get half yearly interest . Now, after that I have assured regular income, I am also investing some money in equities and mutual funds. I have got my portfolio done from an investment advisor and did all investments after thorough analysis . I have bought 200 shares of Panacea Biotech which I think will rise in future. Since liquidity is also a primary concern, I have put around Rs 1.5 lakh in Debt Funds. My investments are ILFS Bond which has been showing almost 18 per cent annual return regularly. In Grindleys Super Saver Growth Plan also I’m getting almost similar returns. Here I would like to mention that returns in debt funds are not expected to be as high atleast for some time in future and before investing one should analyse the performance of the fund. On this money I’m also saving on tax and getting quarterly dividend apart from the benefit of liquidity. There is also no exit load in both these schemes. Almost one third of the money I received is in Fixed Deposits. I also gave some money as gift to my major son in order to receive tax benefits. My other investments are Bima Nivesh which gives average returns and savings on tax. I have also taken Mediclaim Insurance policy for me and my family which would provide cover upto Rs one lakh and the premium in this case is also not very high. With all this investment planning I have fulfilled all my liabilities, and will have regular
returns. With all these investments I am today earning more than what I would have in case I had not opted for VRS. Could have been more planned However, when I look back at the investments I made, I feel I was a bit too conservative. Expert opinion to plan one’s investments is a must, I feel. Though all my money was safe, I did not earn enough and could have taken the benefit of several schemes in the market including equities. (As told to Shveta Pathak — Tribune News Service) |
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by Pushpa Girimaji Change ‘consumer’ concept to ‘citizen-consumer’ THE consumer rights movement is now on a firm footing in the Asia-Pacific region and there are visible signs of it in not just countries like India and Malaysia, but China as well. Consumer representatives from over a dozen countries from this region gathered in Goa last fortnight. And the Goa Declaration that they signed at the end of the two-day deliberations was a reinforcement of their demand that consumer concerns get the kind of attention that they deserve, in not just national, but international forums too. The convergence of consumer groups from the Asia-Pacific region was brought about by the United Nations Conference on Trade and Development
(UNCTAD), along with Consumers International and an Indian consumer group, the Consumer Unity and Trust Society (CUTS), for a specific purpose. And that was to elicit the views of consumer groups from the region on how to protect and promote the interests of consumers in the era of globalisation. The meeting was attended by consumer representatives from Bangladesh, Nepal, Sri Lanka, Pakistan, China, Malaysia, Indonesia, Thailand, Vietnam Mongolia and Fiji, Australia, besides India. Dr Sothi
Rachagan, Director General, Regional office for Asia and Pacific, Consumers International, set the tone for the conference when he said that the rationale for consumer protection was not just economic efficiency, but also equity and social justice. Drawing attention to the urgent need for consumer law in Asia to address poverty, he said it was time to change the concept of ‘consumer’ to ‘citizen-consumer’. Calling for protection of community values and promotion of sustainable production and consumption, he underscored the need for the convergence of environmental and consumer protection laws. He also had a note of advice for consumer groups: the consumer movement, which has so far remained largely an urban middle class movement, should now shift its focus to the rural poor. The two-day deliberations brought out many issues of concern in developing countries such as food safety and security vis-a-vis agricultural imports under the World Trade Organisation
(WTO) regime: threat to self reliance in food production, risks of genetically modified foods, marginalisation of small farmers, threat to bio-diversity and traditional, indigenous knowledge. Consumer groups also decried the reluctance on the part of the governments to consult and involve consumer and other concerned groups in important international agreements, particularly trade agreements that have far reaching impact on consumer interest. The conference also covered a wide range of issues in the context of globalisation such as consumers’ or citizens access to food and water, health care; convergence of the objectives of competition policy and consumer protection policy, regulation of utilities to serve consumer interest, e-commerce and the digital divide, increasing
regionalisation, consumer representation in policy-making and decision-making processes, consumer or citizen’s access to information and justice. The participants also discussed the status of consumer protection in Asia, the UN guidelines on consumer protection and the role of UNCTAD in promoting consumer interests. Mr Philippe
Brusick, Chief of the Competition and Consumer Policies branch of UNCTAD, who explained the purpose of the conference, said enhancing competition was not only about opening borders but primarily about increasing competitiveness by adopting appropriate competition policy and rules to ensure that competition was protected in the interest of both economic efficiency and consumer equity. To this effect, competition law enforcement should be complemented with appropriate consumer protection systems, he said. Many of these views were reflected in the Goa Declaration, when it called upon UNCTAD to strengthen its institutional machinery to promote consumer interests and among others, undertake studies on the impact of trade agreements and global behaviour on consumers and small scale food producers. The declaration also urged UNCTAD to consider setting up of legal advice and research facilities to strengthen consumer groups’ participation in international negotiations and agreements and also promote exchange of information and transparency at corporate, government and international levels. The Goa Declaration, along with similar declarations made by consumer groups in Cartagena (Columbia), Accra, (Ghana) and Bishkek
(Kyrgyztan) would be placed before the “Expert Meeting on Consumer Interests, Competitiveness and sustainable development”, called by UNCTAD in Geneva in mid-October. Taking into account the UN guidelines on consumer protection, the Expert Meeting will examine the new dimensions of consumer protection in the face of privatisation, deregulation and increased competition in the marketplace. It will then formulate appropriate recommendations for action at national and international levels. Whatever may be the final outcome of the Expert Meeting, the Goa conference helped reinforce an important point: That is the need for greater cooperation and coordination among not just consumer groups, but also health and environment groups towards the common objective of citizen welfare. |
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Indica V2 petrol model launched in Chandigarh Chandigarh, September 23 Mr Dube said the Indica V2 petrol comes with a powerful 1400cc petrol engine, with a superior 16 bit micro-processor driven engine management system. Indica sales grew for the third consecutive month with a growth of 49 per cent at 5,157 number in August. It will be available in three versions starting with basic AC LEi model. The other two models one LSi model followed by Top-of-the line LXi model. The basic model is priced at Rs 3.25 lakh (ex-showroom, Chandigarh). It was also launched at Amritsar, yesterday. |
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