Investments available to NRIs--

The government gives non-resident Indians (NRI) the opportunity to open rupee-dominated accounts in India for repatriating funds. The most popular among these are the NRE and NRO accounts. Non-Resident Indians (or NRIs) are treated as a special category of investors, given their Indian antecedents and their growing importance as a significant source of foreign capital in India. The government including regulators like the Reserve Bank of India and SEBI have been formulating and regulating investments by NRIs in Indian securities. It is therefore imperative for NRIs to understand the rules that would have bearing on their investment-making process.

NRIs can invest in shares and convertible debentures of Indian companies listed on NSE/BSE under the Portfolio Investment Scheme (PIS) route.Under this route, an NRI is permitted to invest up to a maximum of 5% of the paid-up share capital / value of each series of convertible debentures of listed Indian companies on repatriation and non-repatriation basis. The aggregate investment by all NRIs cannot exceed 10% of the paid-up share capital / value of each series of convertible debentures of the company. The aggregate ceiling of 10% can be raised to 24%, if shareholders of the Indian company pass a special resolution to that effect.

NRIs may also, without any limit, purchase on non-repatriation basis dated government securities, treasury bills, units of domestic mutual funds, units of money market mutual funds. NRIs are not permitted to make investments in Small Savings Schemes including PPF.

Another indirect mode of investment available to NRIs is by investing in India-focused offshore funds that invest as Foreign Venture Capital Investor (FVCI), Foreign Institutional Investor (FII) or Foreign Direct Investor.

Economic Crisis & Satyam Saga : Boon or Bane for India

It may sound cruel to say this, but the current economic crisis in the West might have brought some unintended benefits to India. This is best illustrated by the case of Satyam. Former chairman Ramalinga Raju has already confessed to having cooked the books, and shown vastly inflated profits and cash. 

This confession letter was sent on January 7 to his Board as well as the whole world. The letter came two weeks after an aborted attempt by him and his Board to inject $1.6 billion of Satyam’s cash into a real estate company owned by his family. Investors were upset, and unleashed their fury by selling Satyam stock, destroying several billion dollars of stock value. 

Hastily, the company reversed its decision. Subsequently, we learnt that Raju and family had pledged their Satyam shares for huge loans, possibly to make investments in real estate. As the stock market crashed, Satyam shares crashed too. And since these shares were kept as collateral with lenders, they wanted more collateral from Raju and family. Or just cash. Nothing was forthcoming, and hence lenders were forced to liquidate the collateral (which was already degraded in value).

Extension of 5-yr tax holiday to 5-star hotels--

ET reports: Industry body Assocham has asked the government to extend tax holiday for all hotel categories, including five-star, specially in the national capital keeping in mind the requirements for the 2010 Commonwealth Games. In the Budget of 2007-08, five-year tax holiday was given to two, three and four star hotels and convention centres with a seating capacity of not less than 3,000 in the NCR. "This facility needs to be extended to all categories of hotels, including five-star hotels, so that their capacity expansion takes place at a desired speed to accommodate large number of tourists expected during 2010 games," it said.

The hotel infrastructure, specially in five-star category in Delhi and NCR where majority of tourists are likely to stay, is still not taking off and therefore to speed up their capacity, five years tax holiday schemes requires to be extended, it added. As per estimates, the Commonwealth Games in 2010 is expected to attract 50,000 foreign visitors to Delhi and about 30,000 rooms would be required to accommodate these visitors. The National Capital Region, currently, has about 10,500 rooms and an additional 15,000 to 18,000 rooms are required to take care of the foreign tourists during the event.

Cramdown--

Cramdown is not a word that appears anywhere in the Bankruptcy Code. Yet it is a well-known and often employed bankruptcy concept, which means, simply, obtaining confirmation of a Chapter 11 plan of reorganization over the objection of one or more dissenting classes of creditors.Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.

During the financial crisis of 2008, cramdown was used to help troubled mortgage borrowers by allowing the bankruptcy courts to alter mortgage terms, subject to certain conditions, in an attempt to keep borrowers from foreclosure when one or more tranches of the mortgage did not agree to loan modification.

Cramdown is accomplished by convincing the court that a plan is fair and equitable even though one or more creditors have voted against it. For a secured claim, a plan may be found to be fair and equitable if, at a minimum, it provides that the lender will retain its lien and receive deferred cash payments equal to the present value of the collateral securing the loan (i.e., a market rate of interest).

Samurai-- the market or the battlefield ??

Samurai market is usually used by non-residents of Japan, with a reference to the iconic Japanese warrior - the samurai. It is the slang term for the stock market in Japan. This market is where non-Japanese entities can launch public bond issues to raise yen finance.Issuance in the samurai bond market has more than tripled over the past several years. Some observers have attributed this growth to a systematic underestimation of credit risk in the market.

This Tokyo Foreign Bond Market(the so-called Samurai market)was created in 1970,with a public offering of yen bonds by the Asian Development Bank. Japan was then one of the largest debtors of the World Bank. Supported by consecutive current account surpluses, the government decided to create the Samurai market, graduating from the World Bank and becoming a capital-exporting country.

Japan's Samurai bond market is in danger of degenerating into a junk market. The traditional dignity of the Samurai title is being threatened by the influx of dubious issues and speculative instruments into the Tokyo market.

Industry's loss is academia's gain...

ET reports: Universities which until last year lost out to corporates when it came to hiring IITians can now able to get the candidates they wanted. Among the many universities shopping for faculty members is the Alfaisal University in Saudi Arabia. It has landed up at IIT-Bombay, Kanpur, Chennai and Delhi and offered an annual compensation of 1.3 lakh Saudi riyals (approximately Rs 17 lakh), apart from housing and other facilities, to students who will soon complete their master's or PhD. "Several universities from across the globe have invited our students to take up teaching assignments. About 40 to 50 PhD and master's students have taken up such offers,'' said B K Mathur, placement chairman at IIT-Kharagpur.

In contrast to the annual compensation of around Rs 19 lakh that international universities offer, at most IIT campuses an Indian educational institute recruiting students for a teaching position typically offers an annual salary of Rs 7 lakh. Texas A&M University, seeking to recruit for its Qatar campus, is scouting IIT-Madras, as is the Hyderabad-based Indian School of Business, to recruit engineers for research activities. Lt Col (Retd) Jayakumar, deputy registrar (training and placement) at IIT-Madras said that so far, "ICFAI Institute of Science and Technology has recruited 19 students and the two Middle Eastern universities are likely to declare their selection lists soon.'' IIT-Roorkee's placements chairman P K Jain said some private Indian universities like ICFAI and Thapar University, Patiala, were also among campus recruiters. . In fact, soon the IITs themselves will get busy recruiting faculty for the new institutes they are mentoring. Already, IIT-Guwahati has recruited 19 PhD qualified faculty members for the institute it is mentoring, IIT-Patna. Other mentor IITs will soon begin recruiting. None of them, however, will be able to match petro dollar salaries.

Foreign Direct Investment--

Foreign direct investment refers to the investment made by an entity in an enterprise located in a different country. By virtue of making this investment, the investor gains a certain degree of influence or control over the management of the enterprise.FDI can be both outward and inward. In the case of inward FDI, the investor can enter the country by incorporating a company, either by getting into a joint venture with an Indian company or setting up a wholly owned subsidiary. Alternatively, he could retain the status of a foreign company and simply set up a liaison, project or branch office in India.

Benefits:FDI comes with benefits for both the investor and the economy where the investment in made. For the investor, this could be a chance to tap markets where he could make profits. For the economy, FDI has provided a muchneeded push in terms of injecting liquidity apart from bringing in better technology, creating more job opportunities and so on.

Difference between FDI & FII :The most visible difference would be that while FDI includes investment directly into a particular company. Foreign Institutional Investors (FIIs) are known to invest either in the primary or secondary markets, in stocks, mutual funds or via instruments such as participatory notes, dated government securities , commercial papers etcetera. There is also a greater perception of stability that is associated with FDI. In periods of market instability , FIIs are known to beat a hasty retreat leaving the market in a lurch.

Source:ET

India's Top 5 Accounting Scandals--

Recently we all have been hearing about the Satyam Scandal and its impact on the image of Indian IT industry.Here below are the India's top 5 Accounting Scnadals that have shocked the Indian market.

1. CRB Capital Markets Limited (1996) ,Amount-Rs 1200 crore

Fraud: Chairman Chain Roop Bhansali, was accused of siphoning off Rs 12 billion in the CRB scam. CRB was accused of using its SBI accounts to siphon off bank funds, claiming it was encashing interest warrants and refund warrants.

2.ITC – Chitalia's Fera Violation(1996) Amount - $80 million.

Fraud: In June 1996, ED started FERA investigation into the export transactions between ITC and the Chitalia group of companies (EST Fibres) during 1990- 1995.

3.Home Trade (2002) Amount - Rs 6000 cr

Fraud: Eight co-operative banks, like Valsad People's Co-operative Bank and Navsari Co-operative Bank from South Gujarat, collectively lost over Rs 80 crore due to bad investments by the Home Trade. It was also linked to Rs 82 lakh forgery in a central government undertaking EPF scheme.

4.DSQ Software (2003) Amount - Rs.595 crore

Fraud: Dinesh Dalmia's Company DSQ Software was accused of dubious acquisitions and biased allotments made in the year 2000 & 2001.

5.Nagarjuna Finance (2003) Amount : Rs 98.37 crore

Fraud: Executives of Nagarjuna Finance, an promoted by KS Raju, was accused of failure to return about Rs 100 crore to depositors in 1997-98.

Young men are worst spenders,not women--

It's always thought that the female shoppers were the ones who doled out money on the latest fashion and trends.Well, then to tell you it is certainly not correct, for it’s the guys who are the worst spenders, says a survey. Debt collection company, Dun & Bradstreet, has revealed that young men are increasingly finding themselves in trouble with debt.According to its survey, which looked at the latest September quarter debt statistics, disclosed that males in particular are getting under huge piles of debt.(Source: ET)

It has also been found that over fifty per cent of all debtors were under 34 years of age. To avoid an increase in over-indebtedness in the New Year, it is absolutely critical that consumers must pay close attention to their finances.

Standing at over 1300 dollars, the company observed that the average debt value for men was 28 per cent higher than their female counterparts.The study also revealed that men decreased their average debt by 1.2 per cent, which was still small compared with women who cut their average debt size by more than three times that level, or 3.8 per cent.

Inflation slides to 5.91%--

Inflation fell for the ninth consecutive week on Friday to a 10-month low of 5.91% for the week ended December 27, owing to cheaper food and manufactured items. It stood at 3.83% a year ago. The index of food articles group declined by 0.7% as prices of jowar fell by 5%, fruits and vegetables by 3%, eggs and bajra by 1% each. In case of manufactured goods, imported edible oil became cheaper by 1%, polyester fibre by 2% and newsprint by 1%. The index of fuel remained unchanged and also there was no movement in the prices of cement and iron and steel during the week. The inflation has been declining after it touched a peak of 12.91 per cent in August last year.(Sorce:TOI)

RBI was compelled to raise the repo rate to a seven-year high of 9 per cent. The RBI now expects the inflation rate to be significantly lower than its March-end target of 7 per cent, while most analysts expect it to be close to 2 per cent. The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is released weekly.

Satyam Accounting Scandal a big blot on Indian IT industry--

An accounting fraud was the last thing investors in India would have imagined as a trigger for a reversal in investor sentiment. The Satyam accounting fiasco has come at a time when the sentiment is already brittle and is likely to affect the image of Indian companies among foreign portfolio investors. The accounting scandal that caused Satyam Computer Services Ltd. to collapse is shaking investor confidence in Indian stocks, putting an end to the market’s best start since 2000. This unfortunate development will be a short-term negative for market sentiment. The country's fourth largest IT company - after TCS, Infosys and Wipro - was for several years cooking its books by inflating revenues and profits, thus boosting its cash and bank balances; showing interest income where none existed; understating liability; and overstating debtors' position.

India’s Sensex index tumbled 7.3 percent (on Wednesday), led by a 78 percent plunge in Satyam. Satyam American depositary receipts fell $8.42, or 90 percent, to 93 cents before the opening of the New York Stock Exchange, which then halted trading in the stock.

The Satyam scandal is spurring concern that India’s corporate governance is inadequate days before the earnings reporting season starts. What is SEBI for if it can't monitor business entities? Worries of thousands of employees and investors who have been left in crisis needs to be redressed immediately. The resignation of Satyam chairman Ramalinga Raju after confessing to have forged and inflated the company's accounts for years has sparked fears among the Indian IT firms. This is shocking, painful and a good warning for other companies in the sector.

Uses for Bonds--

Individuals and institutions can use bonds in many ways: from the most basic, such as for preserving principal or saving and maximizing income, to more advanced uses, like managing interest-rate risk and diversifying a portfolio. Bonds can also be an afterthought, especially during flight-to-quality events, when investors flock to the safest bonds they can find to weather financial storms. Bonds provide a predictable stream of coupon income and their full par value if held to maturity.

Top six ways that you can put bonds to work for you:

1. Preserving Principal

2. Saving

3. Managing Interest-Rate Risk

4. Diversification

5. Expense Matching/Immunization

6. Long-Term Planning

To know in details about each of them, Read here...

The Cockroach Theory !!

"Cockroach Theory" --You hear about cockroaches, you see them, but do you really know the theory related to them?

The 'Cockroach Theory' is a market theory that means that "Bad news tends to be released in bunches" in the same way as seeing one cockroach is usually evidence that there are many more lurking unseen.For example, Bad news from one company in a sector may indicate worsening conditions in the sector, which will therefore mean more bad news can be expected from other companies in the sector. In other words, the fact that one comapny (one cockroach) faced financial problems indicated that many other similar businesses were likely to face the same issues.

Similarly, in the credit market, “once a few problems emerge, investors assume there are many more to come,” the FTN analysts write. “Investors have to be sensitive to credit because nothing else will destroy earnings and capital given leverage inherent in bank balance sheets….”

The name "cockroach" is used for this theory because cockroaches travel in large groups and usually are not looked upon kindly.

Indian economy tops optimism list--

India has regained top slot in optimism among privately held businesses for 2009. While optimism amongst privately held businesses (PHBs) around the world slumped by 56% over the last 12 months.

Despite raging pessimism, the survey found that PHBs from 11 countries remained optimistic about the outlook for their economies, with India leading this group (+83%), and Botswana (+81%) with Brazil (+50%) also emerging on the top. Japan (-85%) and Spain (-65%) were the most pessimistic. It is the first time that pessimists have outweighed optimists about the outlook for their economy .Of the four largest trading nations, PHBs in the United States and mainland China, who together contribute over 32% of global GDP1, scored their optimism at -34% in the United States and +30% in Mainland China. Similarly, Japan and India (collectively contributing over 11% of global GDP) scored their optimism at -85% and +83% respectively. (Source:ET)

When asked to identify the most significant factors causing most concern for their business, PHBs in 33 out of the 36 economies cited a fall in consumer demand, while citing a shortage of business credit as a secondary concern.

Filter rule-- A trading strategy !!

Filter rule is one of the trading strategies that benefit traders from the price movements of the stocks and fall under serial correlation strategy. A technical trading rule in which an investor buys and sells stocks if their price movement reverses direction by a minimally acceptable percentage.

Filter rules are created from analyzing the historical price trends of a security. The assumptions that is followed in this trading is that price changes are serially correlated and emerges from price momentum theory, i.e., stocks which have gone up strongly in the past are more likely to keep going up than go down.

So in conclusion, this strategy may work provided each time your bets are good. However, a good and justified way of making money from this strategy is through efficient money management. Remember, if you want to follow this strategy be prepared to get wiped off completely, and be ready with large amout of money. Evidence has suggested that filter rules are rarely successful in creating profits for the investor.

Artbitrage funds have a greater scope in 2009--

If you are interested in investing in equities but fear the market volatility, the smartest way will be to invest in arbitrage funds. These mutual funds are the best performing funds among the equity category in 2008. In fact, with uncertainty still haunting the financial market, these funds are expected to create value for investors in 2009. The higher the volatility, higher the arbitrage opportunity .But investors not familiar with this type of scheme might just end up thinking that these are just other equity-oriented schemes with a different name. However, this is not so and rather it is a type of income scheme. These funds take advantage of the arbitrage opportunities between the cash and the futures market to generate fixed income.

Such funds are better suited for investors who want low risk profile funds but expect decent returns. What leads (or rather misleads) everyone to believe that arbitrage funds are risk-free is that, in arbitrage strategies, both the buying and selling transactions exactly offset each other, thus making it immune to the market fluctuations. But uncertainty prevails in almost all investment schemes and these funds are no exception.The equity market in 2008 has given a lot of opportunities for arbitrage and mutual funds have been able to capitalize on that.

In India, a host of AMCs, including SBI, JM Financial, Kotak, UTI and IDFC, offer such funds. In the last 12 months, the average returns from arbitrage funds are around 8.8%. Scheme-wise, arbitrage funds such as UTI Spread Fund and HDFC Arbitrage Fund have given a return of 10.57% and 9.37%, respectively.

As far as tax treatment is concerned, since funds are largely invested in the equity arbitrage funds attract a short term capital gain tax of 15%. But if you hold it for more than a year, you are not liable to pay any tax. For tax purposes arbitrage funds are treated as equity funds. Hence, they enjoy lower tax vis-à-vis debt funds.

There is no denying that arbitrage funds are relatively less risky as compared to pure equities. However, to slot them as "risk-free", amounts to mis-representation. Arbitrage funds do have an element of risk; so investors who are being told that arbitrage funds are less risky have been misled.But all funds in this category have in the past one year or so outperformed their benchmarks by a convincing margin and there is greater scope for introducing these products in the coming days. Thus, the investor community should take to this concept more seriously.

Variable annuities & living benefits !!

A variable annuity is a tax-deferred financial product that pays benefits to the annuitant over a specified number of years and a death benefit to the annuitant's beneficiaries. The benefit paid to the annuitant is usually based on the purchase payments and the performance of the underlying investments. The underlying investments can be diversifies and rebalanced, which provides the investor with flexibility to monitor and manage his or her portfolio.However, a variable annuity product may be subject to a variety of fees, including surrender charges if withdrawals are made before certain periods and mortality and expense risk charges.

The living benefit--as the name suggests--is intended to guarantee the benefit provided to the annuitant and toward that end, usually offers guaranteed protection of the principal investment, the annuity payments and/or guarantees a minimum income over a specified period to the annuitant and beneficiary. There are several types of living-benefit features, including the following:

• Guaranteed Minimum Accumulation Benefit (GMAB)
• Guaranteed Minimum Withdrawal Benefit (GMWB)
• Guaranteed Minimum Income Benefit (GMIB)

With many investors seeing their retirement portfolios losing significant market value, a variable annuity with a living-benefit feature can be a good solution for protecting retirement nest eggs.

A key determining factor that affects the choice between an annuity and a traditional portfolio is the individual's need for guaranteed income. For someone with little or no risk tolerance or limited financial resources, an annuity may provide the needed guaranteed income stream.To know more about variable annuities and living benefits..Read here..

Why's the New Year bonanza only for the 0fficers and not for our Jawans--

The hopes of the armed forces had risen after the PM constituted the three-member ministerial committee headed by external affairs minister Pranab Mukherjee in September to look into the four ``core demands''. But the ``piecemeal'' decision of the government now has left the forces stunned.With the armed forces complaining of being handed out step-motherly treatment by successive pay commissions, PMO has decided that the three services will have a dedicated panel to decide salary issues. Though a long pending demand of the forces, the decision does not bring any immediate cheer to Army, Navy and IAF since the next pay commission will come along only after 10 years. As per the PMO communication to the defence ministry this week, only those Lt-Cols serving in combat roles will get PB-4.

Sources say the almost 1.5-million-strong armed forces are seeking a hike of over 400% in their salaries and allowances from amounts fixed by the 5th Central Pay Commission (CPC), which came into effect on January 1, 1996. But whether the 6th CPC gives them what the armed forces think is their due, especially with around 25% of the Rs 96,000-crore defence budget for this fiscal earmarked just for salaries, only time will tell.

It is a good news to officer of defence forces that they had hike in thier salary but what about the jawan, his salary is still equal to civilian peon.I think the govt and the defense minister had made injustice to the jawan. The real fighting force are the Jawans,Sailors and the Airmen of Army,Navy and Airforce respectively. But when it come to matter of benefits- it is for the officers only as always.

Our defence forces are doing excellent job under the current hostile atmosphere. They deserve better than the civilian staff for the reason that the nation's security is foremost and the armed forces are sacrificing their lives for our security. The demand for pay hike by defence personnel is absolutely justified. Their pay package & perks should be AT LEAST double that of a civilian in government service. Only then can we be assured of Quality personnel. It’s sad that our brave soldiers have to literally beg for a rise, when it should have been granted to him gratefully. It is justified demand and should be acted upon immediately. Army personnel at the higher cadre can be compared to any top corporate executive. The salary difference doesn't worth the life risk associated with the profession. Sometimes they are even less paid than a BPO employee. All the Pay Commissions constituted so far have been unfair to the Defence Services, primarily on account of the fact that they do not include a Member from the Defence Services in the Pay Commissions.

It's about time! All armed forces, police force should be well paid ,well trained &well equipped to protect our country, this is the only way out to respect their deeds and services which they render to the mother nation.