Wednesday, March 28, 2007

INR kissed 42.8 to a USD out IT stocks!

What is happening to the rupee?

An appreciation of close to two per cent in a span of five working days....and around double that in over a months time!

Has RBI stopped buying dollars from the open market, because the inflows are not as strong to result in a four per cent appreciation in the rupee against the greenback?

Ofcourse, the sharp appreciation in the rupee against the dollar will keep foriegn investors happy since besides the gain from appreciation in stock prices, FIIs also gain from an appreciation in Rupee. This is because for the same amount of rupees, currently invested, they stand to earn more dollars.

However, Indian IT companies wont like this sharp appreciation in rupee. Since they are exporters of services and earn their revenues in dollars, they will get less rupees for the same number of dollars compared to a month ago. Their margins will take a hit if the rupee appreciation continues.

here's a small and a very simplistic example:

- Company: Infy
- Size of order executed: USD 100 million
- Order finalised in say Feb: when the conversion rate was Rs.44.5 to a Dollar.
- Infy accordingly submits its quote, gets the order and executes the same.
- It stands to earn a 20% margin, ie. USD 20 million or if converted into INR (@ 44.5), Rs.89 crore.

- Suppose INR to a Dollar appreciates to Rs.42.8 (as is the case now). For its USD 20 million, Infy will now recieve (20,000,000 x 42.8) = Rs.85.6 crore or a loss of Rs.3.4 crore.

Watch out for a weakness in IT counters on the bourses. Infact, its not just the IT companies, but also garment exporters (Gokaldas, for eg)., and pharma companies.....

Tuesday, March 27, 2007

Another cool offering from GOOGLE...real-time flight information!

Flying High with Google SMS

Monday, March 26, 2007 at 7:58:00 PM

Ever spent 15 minutes on the phone shouting answers at the automated airline attendant while rushing to the airport? How cool would it be to get real-time flight info just by sending a quick text message? Well, now you can using Google SMS.

Simply text your flight number to 466453 (‘GOOGLE’ on most mobile devices), and the status information will be sent back to you. Or text a specific airline name, and Google will send back the main phone number to call.

This is available for flights departing or arriving in the U.S., and all of the information is provided by And as always, it’s free.

Give it a try, and then let us know what you think.


Found it from google's official blog. Given the timeliness (or the lack of it) of low-cost airlines in India, this service will surely be a run-away hit in India.....

The War on Inflation...Business World article

After arm-twisting producers to push down the prices of sugar, steel and cement, the government is now considering lowering the price of milk, oilseeds and fertilisers as part of its campaign to tame inflation. Our resident astrologer predicts the future of the war on inflation.

1 April 2007: After a huge rally by oilseed farmers protesting against the maximum price, the government announced a minimum price to be paid to farmers for oilseeds, which will be higher than the maximum price paid by consumers. The difference will be recovered through an oilseeds cess to be paid by oil companies.

15 April: With WPI inflation going through the roof, thanks to a big jump in the price of eggs and fish, the government today imposed price controls on eggs and fish. "It's aimed at buying support from the fish-eating Goa population before the assembly elections there," said a cynical opposition member.

1 May: Milk producers have complained that they were forced to charge higher prices because of the high cost of milch cattle. The commerce minister has imposed a price ceiling on cows. Meanwhile, the plea by oil companies that they have nothing to do with oilseeds has been rejected.

1 June: WPI inflation numbers have jumped this week on account of a sharp rise in the price of gingelly oil (up 12 per cent), copra (up 9 per cent), zinc ingots (17 per cent), fluorite (48 per cent), fire clay (29 per cent), steatite (20 per cent), magnesite (13 per cent), felspar (4 per cent), kaolin (3 per cent) and capsules other than vitamins and antibiotics. The government has promptly announced price controls on all these items.

15 June: Egg producers have complained to the finance minister about the high cost of hens, which they claimed was the major reason for the rise in egg prices. A decree has since been signed by the finance minister imposing a price ceiling on hens.

30 June: Copra producers have argued for a level playing field. Conceding to the force of their argument, the Prime Minister today issued an order that no coconut in the country should sell for more than Rs 6.75 each.

1 July: The PM today amended his order on coconuts and announced that large ones (measuring more than 4 inches in diameter) may now be sold at a higher price of Rs 7.25 each.

15 July: With eggs, fish, felspar, kaolin and coconuts being sold in the black market, the government has threatened severe action. The Enforcement Directorate has been told to crack down on money laundering by fishermen. "Every rotten egg trader should be hanged from the nearest lamp post," thundered the home minister.

1 September: The dates for the Gujarat state elections have been announced. In other news, the government has imposed price controls on dhokla, thepla and khakra.

15 September: The ceiling on zinc prices has led to zinc producers shutting shop, as a result of which zinc users have to use high priced imports. To counter this anti-social behaviour, the government today announced that each zinc producer must produce a minimum of 10,000 tonnes of zinc or face immediate execution.

1 October: Stung by criticism that the government has done nothing to stem the rise in prices of services, price ceilings have been imposed on dance bars.

15 October: Gearing up for the 2009 Parliamentary elections, the finance ministry today released Volume 1 of the Price and Production Control Handbook (932 pages) containing detailed lists of items under price ceilings and production quotas. Volumes 2 and 3 will be out soon. "We are proud that we have been able to bring out this document in the 90th year of the founding of the Soviet Union," gushed the finance minister, whose designation will soon be changed to Comrade Chief Price Controller. In other news, the Republic of India today changed its official name to 'The Union of Indian Socialist Republics' (UISR).

The article is available here.

Friday, March 23, 2007

Friday, March 09, 2007

Blog reading becomes more interesting: Mark Cuban v/s Google

Blog reading has become even more interesting. Over the past few weeks I've been reading this blog by Mark Cuban. The guy has been after Google for sometime, ofcourse not in the usual "I need publicity so let me take on someone famous". He is quite a celebrity himself and has been writing a lot about Google and Youtube on his blog. His observations are not only very interesting but are also very insightful.

Read and enjoy. Here's an excerpt of his latest blog entry -

This past week I decided to supoena Google to get the names of users that were uploading copies of our movies. I have no intention of pulling an RIAA and suing the users. I do have every attention of sending supoenas early and often to get the names and emails of users uploading our content they have pirated.

Why ? To learn.

I expect that the users will have given fake information, but i want to confirm that is the case. It will be a useful data point. I find it hard to believe that when there is ultimately a legal battle, that the courts will allow a company that I suspect that from time to time we will get the emails and actually be able to make contact with users. That is when it could get interesting. I want to ask them some simple questions. The first of which is why ? Sure there are a lot of possible and obvious answers, but maybe the will tell me something new or interesting that I can learn from.

The 2nd question will be whether they were induced by Google in any way to upload the video. Not that I think Google coerced them in any way. I don't. But I want to know if they feel that Google endorses and supports uploading and streaming of pirated content. I want to know why they ignored the warnings that are on the video upload page.

...continue reading the entire thing here.

Saturday, March 03, 2007

Global "Money-making/losing" markets at a glance!!


After a weekly decline of 5% where do we go?

To answer this question I did a small study on weekly Sensex returns since 1991. Here's the summary:

Total no. of observations: 891

- Returns/Declines (> -2%): 85 instances
- Returns/Declines (> -3%): 41 instances
- Returns/Declines (> -4%): 20 instances
Returns/Declines (> -5%): 7 instances (including the decline during the week ended 2 March 07).

Investments made immediately after such a sharp drop yielded the following:

- Instance I : -4.6% (1m), -9.5% (2m), -5.7% (3m)
- Instance II : 4.8% (1m), -0.2% (2m), 0.8% (3m)
- Instance III : -3.1% (1m), -3.8% (2m), -8.3% (3m)
- Instance IV : -1.2% (1m), 2.3% (2m), 1.0% (3m)
- Instance V : 6.2% (1m), 8.5% (2m), 6.1% (3m)
- Instance VI : -4.6% (1m), -3.1% (2m), -2.3% (3m)

The results do not present a strong case for making an investment immediately after a sharp drop, as seen during the week ended 2 March 2007. So maybe its better to wait and watch for now. However, one cannot rule out taking individual stock positions, especially if some of them witness an unwarranted drop in price. I made a fresh investment in JK Lakshmi Cement on Friday.

Fresh Investment: J K Lakshmi Cement

Bought JK Lakshmi Cement today at an average price of around Rs.120 per share. Looks really cheap at current levels. Numbers in brief are given below:
  • CMP = Rs.118 per share
  • P/E = 4.6 times
  • Qrtrly PAT = 55 crore
  • Trailing 12 mnths PAT = Rs.137 crore
  • Annualizing recent quarters performance APAT = Rs.200 crore plus
  • CMcap = Rs.630 crore

Discounting FY08 expected profit @
  • 5 times = Rs.187, a gain of 59% over CMP
  • 7.5 times = Rs.281, a gain of 138% over CMP
  • 10 times = Rs.375, a gain of 217% over CMP
However, it is important to note that low p/e's mark the end of a bull run in cyclical stocks. For eg. steel, aluminum & sugar stocks. However, in case of cement, I think the end of bull-run is still a year away. So for now investment in cement stocks makes sense to me. Looking at a target price of around Rs.250 in about 6-8 months time.

Happy Investing!