CONSTRUCTIVE INVESTMENT DECISIONS

 for 

MULTI-BAGGER RETURNS!! 

ACTUALLY, NOBODY EVER LIKES TO TRADE FOR A LOSS BUT SELDOM RECOGNIZE THE INHERENT THREAT INVOLVED & THE DAMAGE THAT MAY OCCUR IN TRADING!

TRADER PSYCHOLOGY & EGO GRATIFICATION: 

MOST TRADERS THINK, MANY VEHEMENTLY CLAIM THAT THEY ARE MORE SMART AND INTELLIGENT THAN THE REST. THIS BEHAVIOURAL ATTITUDE ELEVATES THEIR EGO AND ENCOURAGE TO GO FOR TRADING TO MAKE “HUGE MONEY” – UNEXPLORED!!!.

RETAIL TRADERS AS WEAK HANDS, STAY LOW WITH SPECIFIC INFORMATION GET TRAPPED DUE TO EMOTIONAL TRIGGERS TO GRAB "BUY LOW- AS OPPORTUNITY" SHALL TRY TO UNDERSTAND BROAD MARKET ACTION

ULTIMATELY, MOST GET TRAPPED IN THIS VICIOUS CYCLE OF LOSING PROPOSITION, THOUGH THEY UNDERSTAND ENTANGLED DIFFICULTIES ASSOCIATED BUT PSYCHOLOGICAL COMPULSIONS TO PROVE SMARTNESS TO EXTERNAL WORLD, INCLINE TO HOOK ON TO THE WHEEL! 

WIDESPREAD OPPORTUNITIES & TEMPTATIONS:

TRADERS GET EVERYDAY OPPORTUNITIES TO PARTICIPATE IN DIFFERENT INSTRUMENTS AS TRILLIONS OF DOLLARS WORTH BEING TRADED ON THE EXCHANGES ACROSS THE GLOBE THROUGH VARIETY OF INSTRUMENTS LIKE DEBT, CURRENCIES, EQUITY, GOLD, CRUDE OIL AND OTHER COMMODITIES etc.

THE TEMPTATION TO BUY AT LOW WHEN MARKETS START FALLING WITH AN ANTICIPATION TO BOUNCE AND SELL IN A TRENDING HIGH MARKETS WITH AN ANTICIPATION TO FALL, ADD TO THOSE MISTAKES ADOPT "AVERAGES" AS A STRATEGY SINKS TRADERS CONFIDENCE THERE BY WEALTH EROSION & EXTINGUISH!, EXPLORE & UNDERSTAND HOW DOES EVER MARKETS OFFER PROFITS TO EVERY TRADER?.

ADOPT INVESTMENT STRATEGIES: BUY GROWTH STOCKS

MARKETS FALL NOT BECAUSE TO FALL FOR A REASON BUT ALSO TO DUMP THE LAGGARDS AND SHIFT/CHURN FUND ALLOCATION TO EMERGING SUNRISE SECTORS AND TO CATCH GROWTH STOCKS AT THEIR BEST POSSIBLE LOWER RATES FOR FUTURE THUMPING RETURNS!.

THE FIIs, DIIs & OTHER INSTITUTIONS EMPLOY TAMS TO STUDY, DEVELOP RESEARCH REPORTS FOR A SPECIFIC COMPANY OR A SECTOR IN ADVANCE, TAKE A WELL INFORMED CALL WITH ADEQUATE PREPARATION. THEY “GO FOR A DUMP” OF THE PAST LAGGARDS DURING MARKET SELL OFFS. UNFORTUNATELY, RETAIL INVESTORS WHOSE ROTTEN MEMORY, STUCK WITH OUTDATED IDEAS TEND TO BUY THESE KICKED STOCKS, JUSTIFYING AS YESTER YEAR'S GOOD COMPANIES.

AFTER A PAINSTAKING WAITING OVER A PERIOD OF TIME MAY REALISE THAT THESE SCRIPS WERE SOLD DUE TO POOR FUTURE BUSINESS PROSPECTS TO PERFORM OR A CHANGE IN MACRO ECONOMIC COMPETITION, BUT BECOME TOO LATE AS THE PRICE SINKS TO ITS ABYSS…!!.

CONCLUSION:

HYPOTHETICALLY, ALL INVESTMENTS SHALL YIELD POSITIVE RETURNS BUT NEVER HAPPENS DUE POOR SELECTION!. SO, ALWAYS INVEST IN COMPANIES AS GROWTH STOCKS TO BECOME MULTI BAGGERS OVER NEXT 4-5 Yrs, WHOSE BUSINESS SCOPE IS LARGE, ASSOCIATED & EXPAND WITH BOOM IN ECONOMIC ACTIVITY FOR ASSURED PROFITS TO EXCEL & LEAD IN FUTURE. 

RETAIL INVESTORS WHILE PARTICIPATE SHALL TAKE CONSTRUCTIVE INVESTMENT DECISIONS AND KEEP ON INVESTING AT REGULAR INTERVALS THAT BECOMES A "HAPPY INVESTING" BASED ON THE FUNDAMENTALS RATHER THAN MERE "TIPS OR A CHEAP SCRIP". 

WHEREAS TRADERS SHALL NEVER TRADE WITH FRUSTRATION OR VENGEANCE, ALSO WITH HIGH LEVERAGE, SHALL CONDUCT A SERIOUS STUDY OF SCRIP LEVELS TO PLAN THE TRADE & ADOPT A STRATEGY TO TRADE WITH CAUTION.

TRADERS SHALL NEVER CONVERT TRADE POSITION INTO INVESTMENT DECISIONS, ALSO NO HESITATION TO BOOK LOSS WHEN STOCK FAILED TO PERFORM IN THE ANTICIPATED DIRECTION. TRADERS SHALL DEVELOP SHREWDNESS TO SWITCH POSITIONS AS OPPORTUNITY ARISES IN THE BROAD MARKET DIRECTION...!!! 

BUY HIMADRI

Quarterly results in brief

(Rs crore)

	Dec' 15	Sep' 15	Jun' 15	Mar' 15	Dec' 14
Sales	305.51	310.18	275.92	341.86	326.95
Operating profit	53.50	35.92	16.71	6.47	29.01
Interest	25.42	30.37	27.50	16.22	30.34
Gross profit	25.96	1.83	-14.19	-10.90	-0.19
EPS (Rs)	0.15	-0.25	-0.52	-0.41	-0.25

Himadri Chemicals & Industries Ltd, the flagship of Himadri Group, is the largest manufacturer of coal tar pitch in India. The company was founded to develop, manufacture and market chemical products with a special emphasis on coal tar and its derivatives. They supply coal tar pitch to well-known domestic aluminium and graphite industry players like Nalco, Balco, Hindalco, HEG, Graphite India and international players like Dubal, AOG, Graftech and SGL. The company is a leader in the domestic market for the supply of coal tar pitch and other by-products with around 70 percent share of the market. The company has five state-of-the-art coal tar distillation plants in India. The company has two plants in Howrah, West Bengal, one in Hooghly, West Bengal, one in Visakhapatnam, Andhra Pradesh and one in Korba, Chhattisgarh. Himadri Chemicals & Industries Ltd was incorporated as a private limited company in July 1987. In November 1991, the company was converted into a public limited company. In the year 1996, the company developed a technology for producing impregnating pitch and in the year 1997, they completed the expansion and modernization of their Howrah and Visakhapatnam plant. In the year 1999, the company set up third state of art coal tar distillation plant at Howrah. In the year 2001, they formed the corrosion protection division and starts manufacturing coal tar based pipe coating product at Visakhapatnam. In the year 2002, they introduced Liquid Pitch, which are supplied to the consumers in specialized and dedicated tankers. In the year 2003, the company set up their fourth modernized coal tar distillation plant at Hooghly with capacity to produce 1,20,000 MT of Coal Tar Pitch per annum. During the year 2005-06, the company commissioned a by-product plant in Hooghly for the manufacture of value added products. They   also commissioned a pilot plant for the manufacture of advanced carbon material used in lithium ion batteries with in-house technology.  The company expanded the production capacity of the coal tar pitch at Hooghly form 28700 MTPA to 63700 MTPA. The company commenced the supply of coal tar pitch to Dubai Aluminium co, manufacturer of the highest purity aluminium in the world. They also commenced a representative office in China. During the year 2006-07, the company incorporated a wholly owned subsidiary in Hong Kong to manage their customer presence and facilitate the acquisition strategy. They set up a plant at Korba in Chhattisgarh as a precursor. They commissioned two windmills, which can generate 2.50 MW wind energy in the Dhule district of Maharashtra. In the same year, the company completed the first phase of expansion at Mahistikry, West Bengal to manufacture naphthalene. Also, they installed a granulation unit used for cooling coal tar pitch from more than 300 degrees centigrade to atmospheric for onward conversion into solid pencil form. The company expanded the coal tar distillation capacity in Hooghly from 91000 MTPA to 170000 MTPA. During the year 2007-08, the company commissioned their melting plant in Korba plants to build dedicated melting facilities near major customers' plant to accelerate just-in-time delivery.  The company has undertaken a project at Mahistikry in West Bengal for the manufacture of Carbon Black with an annual capacity of 50000 MT and a capitive power plant of 12 MW capacity based on waste heat gas through forward integration. In September 2008, the company through their wholly owned subsidiary company, Himadri Global Investment Ltd entered into a joint venture contract, with Chinese company to takeover existing coal tar distillation plant in Xiaoyi, Shanxi.

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http://articles.economictimes.indiatimes.com/2012-02-06/news/31030975_1_capacity-expansion-himadri-chemicals-tonne-capacity
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http://articles.economictimes.indiatimes.com/2011-07-01/news/29726284_1_organic-growth-capacity-expansion-expansion-plans

=====
THANKS TO BS, REDIFF,ICHARTS AND ET FOR THEIR INFO SUPPORT.....

STOCKS CRASH..MANGE WELL!!

NAGESWARA RAO BAMMIDI

CFO-MIHIR MOBILE SOLUTIONS, bnr789@gmail.com

HOW TO DEAL STOCK MARKETS- BRIGHT FUTURE AHEAD..!!

ALL MARKET PARTICIPANTS KNOW THAT THE PROFITS FROM STOCK MARKETS ARE THE DEALS MADE FOR A DIFFERENTIAL AMOUNT REALIZED FROMBUY & SELL or SELL & BUY...!!! 

FOR DECENT PROFITS "BUY LOW and SELL HIGH" - GLOBALLY ACCEPTED and WELL ACKNOWLEDGED ADAGE IN STOCK MARKETS ....

MANY EXPECT, GET THEMSELVES PREPARED BUT MOST RETAIL INVESTORS HATE BUT SURPRISES ARE VERY COMMON IN STOCK MARKETS. THE WELL INFORMED FOREIGN INSTITUTIONAL INVESTORS, NETWORK ESTABLISHED INSTITUTIONS, SEASONED HNIs, OF-COURSE BACKED WITH DEEP POCKETS, TEND TO ACT PROMPTLY WITH RIGHT DECISIONS AND MANAGE  GLOBAL STOCK MARKET TRENDS WITH THEIR NETWORKS AND EXPERTISE! TO ENHANCE THE  SPROUTING EUPHORIA OR ENLARGE PANIC SITUATIONS TO CREATE MORE TURBULENCE AS THE CASE MAY BE, AND FINALLY MAKE PROFITS FROM THE MARKETS...!!, BUT HOW MANY RETAIL INVESTORS AND PARTICIPANTS GET THESE ADVANTAGES??..

FEAR & GREED RULES:

THE SERIOUS SELL OFF FROM HIGHS IS A GREAT CONCERN TO MANY RETAIL INVESTORS WHO TEND TO HAVE THE TEMPTATIONS TO CATCH THE SHOOTING STOCKS AT THE HIGHS WITH OUT FUNDAMENTAL VALUE AND PRAY FOR THEIR SUCCESS AS THE RISK IS HIGH. ALTHOUGH, KNOW THAT THE MARKETS WENT UP SUBSTANTIALLY BUT GREED EARN AND TO ACT SMART TEND TO BUY, WAIT FOR THE "OTHER FOOL"

COMMON MISTAKES: WHEN MARKETS TOOK A SERIOUS BEATING, AGAIN RETAIL INVESTORS WITH FEAR OF FURTHER LOSS TEND TO SELL AT THE BOTTOM WITH AN INTENTION TO CATCH THE STOCK AGAIN AT THE LOWER LEVEL, BUT FAIL TO GARNER THE OPPORTUNITY, AGAIN A SIMILAR MISTAKE AS THEY DID AT THE HIGH POINTS.

JUST TECHNICALS:  STUDY THE SCENARIOS DEVELOPED OVER A PERIOD OF TIME...

FROM LOW TO HIGH, MADE A JOURNEY OF 4000 POINTS SINCE AUG-13,NFTY LIKELY TO GET SUPPORT AT 6500-6550 LEVELS. 

NIFTY TOOK A DECENT JOURNEY FROM 5100 LEVELS TO 9100 LEVELS IN TWO YEARS AND EVERY BODY MADE A WISH FOR FURTHER HIGHS WITHOUT CONSOLIDATION AT ANY LEVELS. THE NEW GOVT.  FORMATION TRIGGERED HIGH EXPECTATIONS, WERE SOLD TO RETAIL INVESTORS AND NOW EXPERTS SAY THAT NO MAGIC WAND AVAILABLE TO CHANGE THE ECONOMY IN A DAY OR TWO WHEN GLOBALLY WELL CONNECTED AND INTER DEPENDENT....

CONCLUSION: THE FUNDAMENTAL ANALYSTS/INVESTORS GRAB THESE KINDS OF SELLOFFS TO BUY AND HOLD FOR A REASONABLE TIME  AS THE VALUATIONS MATCH THEIR EARNING.

THOSE WHO STUDY THE FRACTALS, WAVES OR FIBONACCI CAN EASILY CALCULATE THE NEXT MOVE.....

--------------

https://www.linkedin.com/pulse/how-deal-stock-markets-bright-future-ahead-nageswara-rao-bammidi?trk=hp-feed-article-title-publish

US MARKETS CRASH ....BEWARE!!!

PAUL B. FARRELL 

Opinion: 100% risk of a 50% stock crash if Donald Trump wins nomination

Published: Sept 5, 2015 8:43 a.m. ET

By

PAUL 

B. FARRELL COLUMNIST

“Who will get the Dreary Recovery Going?” taunts Mort Zuckerman in a Wall Street Journal op-ed. The head of U.S. News & World Report warns America that a recession is coming: “They occur about every eight years and America is ill-prepared to weather the one on the horizon.” Ill-equipped.

Yes, the clock is ticking, every 8 years. 2000. 2008. Next 2016, even with a President Trump.

Another great newsman, Bill O’Neill, publisher of Investors Business Daily, author of perennial best-seller “How To Make Money in Stocks,” agrees: Markets have peaked and crashed roughly every four years for the last century, with bigger crashes, long recessions, every eight years. And still most investors will be ill-prepared.

Sounds like a double-teamed confirmation of Jeremy Grantham’s famous BusinessInsider prediction for 2016: “Around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.”

Get it? A mega crash is coming, dropping half off its peak, down below Dow 5,000. Not just another 1,000-point correction like last month. But a heart-stopping collapse coinciding with the 2016 elections ... then a long systemic recession ... probably lasting till the 2020 presidential election, maybe longer ... no matter who’s in the White House, Doanld Trump, Jeb Bush or Hillary Clinton.

Yes, recessions hit every eight years. The last was just about 8 years ago, warned Zuckerman with these facts: “The period since the Great Recession ended in 2009 has seen the weakest U.S. recovery since World War II,” Our aging bull is actually warning us ... recession dead ahead.

Why no “urgency from the White House,” no push to strengthen the U.S economy, avoid the coming recession? asks Zuckerman. Why? GOP candidates are worse, immature teenagers offering a “handful of Band-Aids.” Any leaders? Trump the egomaniac? God help us.

Next another disturbing Journal op-ed gets tossed into the mix: Dick Cheney is on the attack, sounding like fellow Republican Trump’s motto, “Make America Great Again.” Build a bigger Pentagon war machine, says the architect of the $5 trillion Iraq War fiasco. His latest rally cry: “Restoring American Exceptionalism.” Sorry folks, but the GOP’s relentless efforts to sabotage the White House the last six years (like 50 repetitive and futile House votes to repeal Obamacare) was the exact opposite, an “exceptional” failure of leadership.

The former vice president also quoted conservative columnist Charles Krauthammer: We’re at a “hinge point in history.” And former New York Times war correspondent Chris Hedges one-upped Cheney in Salon.com: The “world is at a crisis point the likes of which we’ve never really seen.” Like the 1848 European revolutions. Hedges even warns liberals, “climate change is the least” of the world’s problems, don’t even think that “voting for Hillary will make any difference.”

Tell Trump the ISIS War will increase taxes, add trillions of new debt

Yes, folks, the GOP neo-con hawks are back at it again, want new wars ... liken Obama to Hitler ... fueling Cheney’s latest bout of extreme hubris ... arming another Bush effort to take over America a third time ... Cheney claims America is weaker today than at the start of his costly ill-fated Iraq War. He should endorse Trump, they both want a new superpower military ready to start new wars, fight revolutionaries, add big debt, run up casualties.

So here we go again. Be exceptional. By fighting bigger wars? Show China we’re more macho? All as the Chairman of the Joint Chiefs Gen. Martin Dempsey is over in Iraq admitting this won’t be a short war, in contrast to Cheney’s claim we’d be in and out of Iraq fast after the shock-and-awe wave, even “greeted as liberators.”

Another $10 trillion loss, long recession dead ahead

Meanwhile, Dempsey admits the current ISIS war could take decades, with multiple deployments, bigger Pentagon budgets. On top of that, retired Navy Rear Admiral Len Hering warns that the risk to America’s national security is growing fast due to global climate change and rising resource conflicts, a product of the endless droughts and food shortages that intensify regional wars.

Yes, bigger wars, more costs. But unfortunately that’s “not a message the White House or Congress wants to hear,” says Foreign Policy’s Dan de Luce. Why? Politicians are lost without a moral compass, playing endless myopic political games, blind, in denial, threatening costly new wars that pile up more and more debt on top of the debt we were forced to borrow from China to finance Cheney’s Iraq War.

Perfect Storm: New president, Dow 5,000, recession, growth drops

All the recent turmoil is but a prelude to a “Perfect Storm” dead ahead: The recent 1,000 point drop ... slowing global economic growth... China’s market crash ... a Fed rate hike ... worst Dow volatility in 100 years ... the slow death of the oil era ... a long costly ISIS War ... droughts ... forest fires ... irrational climate science denialism ... and more.

And history tells us it doesn’t matter who’s elected president. Trump? Sanders? Hillary? Jeb? Doesn’t matter. Markets don’t care. Remember, McCain? Big crashes, recessions happen, about every eight years. Nobody really cares. Why? Once again we’re playing the game of musical chairs, gambling on the race for the 2016 White House.

And everyone’s playing: Everybody. We instinctively know the market’s headed for another fall. Again. Part of the game, right. In fact, knowing a big crash is coming makes the game more exciting, right! So we all just keep playing for another point, praying we can time our exit just before the coming collapse.

If 250% isn’t enough ... keep playing the game ... but play defense

Yes, the market is up over 250% since 2009. Time to get out? Yes, except the Wall Street casinos keep stirring the pot, there’s more life in this bull. So we keep playing for more gains, more thrills, in the race to the 2016 peak.

How big a crash? Twenty percent? Grantham’s 50%? Lose $8 trillion like 2000? Lose another $10 trillion like 2008? Seems nobody really cares anymore. Today’s game of musical chairs reminds us of that fabulous upbeat bank CEO in our favorite Robert Mankoff New Yorker cartoon who is sounding like Trump:

The CEO is at a podium motivating shareholders: “While the end-of-the-world scenario will be rife with unimaginable horrors, we believe that the pre-end period will be filled with unprecedented opportunities for profit.”

And that is the answer to Zuckerman’s question: “Who will get this Dreary Recovery going?” Answer: Nobody. Why? The question was rhetorical, he gave us the answer: “Recessions occur about every eight years. And America is ill-prepared to weather the one on the horizon.”

Yes, another recession is “on the horizon.” Also another $10 trillion crash. And another painful GOP loss in the 2016 elections.

http://www.marketwatch.com/story/100-risk-of-a-50-stock-crash-if-donald-trump-wins-nomination-2015-09-04?link=kiosk

MONEY SECRETS...

7 money secrets the rich don't want you to know
The Motley FoolAsk most personal finance experts and they'll tell you the secret to becoming rich is no secret at all: Work hard, live below your means and save every dime. The nation's One Percenters, however, might disagree.There's no shame in a modest lifestyle -- even Warren Buffett lives frugally. But if your goal is to get rich, it's helpful to know these seven secrets the ultra-wealthy aren't likely to share.1.  Salary isn't the whole story:
Climbing the corporate ladder will only get you so far; at some point, you reach your earning potential and plateau. The rich know that in order to grow wealth, it's important to make your money work hard for you -- not the other way around. In fact, Robert Kiyosaki, author of the No. 1 best-selling personal finance book "Rich Dad, Poor Dad," built his entire money philosophy around this concept.Generating income from passive, rather than active, income sources is the best way to do this. Investments that yield passive income include dividend-paying securities, rental properties, profits from a business you do not directly manage on a daily basis -- even royalties on creative work or inventions.2. Take advantage of time, not timingIf the recent Dow Jones crash proves anything, it's that no one can predict what the market will do tomorrow. The wealthy know this and make no attempt to moonlight as day traders."Time is more important to investment success than timing," explained Peter Lazaroff, a certified financial planner who manages portfolios upwards of $10 million for Plancorp, LLC. "Most of the population believes that timing the market's moves is the key to growing rich through the stock market. The wealthy, however, understand that time and compound returns are the most important factor in growing wealth."Though it might seem counterintuitive, getting rich requires investors to adopt an unsexy buy-and-hold strategy, ride out market fluctuations and ignore speculation.3. Put it in writingThe difference between having an idea and putting it on paper is often what separates the uber-successful from average folks. And if you equate success with wealth, it might be time to start writing down your goals, both large and small, in order to become rich.Thomas Corley, author of "Rich Habits: The Daily Success Habits Of Wealthy Individuals," noted that 67 percent of the wealthy people he surveyed wrote down their goals, while 81 percent kept a to-do list. If your goal is to become a multimillionaire, write it down along with an action plan for making it happen.4. Understand value over costAccording to Justin J. Kumar, senior portfolio manager at Arlington Capital Management, "The wealthy person has three best friends: her attorney, her accountant and her advisor. The wealthy tend to use the law and tax code to their advantage when figuring out how to maximize their wealth, especially over multiple generations, and they are not afraid to spend money up front for counsel to get these answers."Kumar explained it's common for middle-income Americans to cut corners in order to save money, yet ultimately find the results lacking. "The wealthy look at value over cost, but they are still prudent in their decisions," he said.5. Eat out lessPeople who are concerned with saving money often skip the daily latte. The rich enjoy small splurges such as Starbucks whenever they want and instead look at saving from a bigger picture.Author Paul Sullivan and colleague Brad Klontz, a clinical psychologist with an academic appointment at Kansas State University, conducted research on the difference in spending habits of the 1 percent and the 5 percent. The 1 percent spent 30 percent less on eating out and saved it for retirement instead. "And that, more than the cost of a Starbuck's latte, is what, over time, separates the wealthy from everyone else on the wrong side of the thin green line," Sullivan wrote in Fortune.6. Be your own bossEmployees work to make their bosses rich. If you're aiming for true wealth, consider starting your own business. According to Forbes, nearly all of the 1,426 people on its list of billionaires made their fortunes through a business they or a family member had a hand in creating."Many middle class workers think that starting a business is too risky," noted Robert Wilson, a financial advisor and frequent contributor to CNN, NBC and CBS. "The wealthy understand that what's risky is allowing your time and earnings to be dictated by a boss who couldn't care less about whether you get what you want for your life."7. Use other people's moneyTo the average person, "it takes money to make money" might sound like a tired cliche used to justify irrational spending. For the rich, it's a golden rule of wealth.The key is leveraging other people's money to increase your own wealth."Trading time for dollars is a losers' game, especially as technology destroys many jobs that don't require a highly skilled human being," said Wilson. "Using money from banks/investors and hiring people to work for you is a time-tested formula for building wealth, not to mention the tax laws, which heavily favor businesses."Whether you're fundraising to start a business or flipping real estate for a profit, relying on other people's money to do the heavy lifting greatly increases the return. Of course, it's also riskier than relying on your own funds. But if you follow the sage words of the great Warren Buffett, consider that "risk comes from not knowing what you're doing."This article originally appeared on GOBankingRates.com.The next billion-dollar iSecretThe world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.http://www.msn.com/en-in/money/topstories/7-money-secrets-the-rich-dont-want-you-to-know/ar-AAdYPlF 

TAX, STOCK MARKETS-614 Cr, SMALL CAPS..!!

How they made Rs614 crore playing the system

Investors in four companies mis-used the tax benefit on long-term capital gains to make a huge profit

 

Rajesh Kumar 

Four small companies, a stock exchange platform, an intention to cheat, and misuse of tax laws—all came together to change the colour of the money.

Recently, in a letter to the Ministry of Finance, the Bombay Stock Exchange (BSE) suggested that differential treatment of capital gain between unlisted and listed securities should be harmonized as it is being used by some to manipulate stock prices and evade taxes. While long-term capital gains (LTCG) on listed shares is exempt from tax under Section 10(38) of the Income-tax Act, 1961, the same is 20% after indexation for unlisted shares.

The letter was motivated by a recent Securities and Exchange Board of India (Sebi) order, which looked into transactions related to four companies listed on the BSE’s small and medium enterprise (SME) platform. The transactions showed how the system was used by some “to convert ill-gotten gains into genuine one”, stated the Sebi order.

Modus operandi

Sebi looked into the transactions related to four companies, namely, Eco Friendly Food Processing Park Ltd (Eco), Esteem Bio Organic Food Processing Ltd (Esteem), Channel Nine Entertainment Ltd (CNE) and HPC Biosciences Ltd (HPC). All are listed on the SME platform of the BSE. All four companies were listed between January and March of 2013. What caught the regulator’s eye was the massive increase in share prices of these companies. Eco’s share price went up about 64 times between 14 January 2013 and 31 December 2014. Similarly, Esteem’s share price went up about 32 times between 7 February 2013 and 31 December 2014. The other two companies (CNE and HPC) also registered comparable increase in their stock prices. This was despite no improvement in their fundamentals. That was only the beginning of the story.

The Sebi investigation found that an entity named Goldline International Finvest Ltd (Goldline) was holding shares in three of the above mentioned companies. Further, it was allocated shares on preferential basis and, later, these companies issued bonus shares. The idea was to increase the share capital on the books of the companies. As the share capital went up, they approached the market with an initial public offer (IPO). Meanwhile, before the IPO, Goldline had transferred its stake in these companies to other entities. During the IPO, it has now been discovered, common entities were buying or funding buyers for all companies. “It has been observed during preliminary inquiry that a set of common entities were funding the IPO of all the aforesaid companies either through directly transferring the amount in the escrow account of the companies on behalf of certain IPO allottees or by transferring the amount to the concerned IPO allottees’ bank accounts, who, in turn, applied for the shares in IPO,” said the Sebi order.

After the IPO, the proceeds were transferred back to the funding entities either directly or through layers of transactions. That’s not all. What is interesting is that these IPOs came one after another and proceeds of one IPO were routed to buy shares of the other companies through the funding group. Naturally, the money raised through the IPO was not being used for the stated purpose. But that is only a minor offence in the given scheme and scale of operations.

People managing the show had different ideas. Once the shares were listed, as expected, the trading volume was low, but prices kept rising. As the lock-in period for the pre-IPO allotment of shares got over, volumes also began to rise. There was no corporate action to justify the spurt in volume and prices. In fact, as the regulator pointed out, these companies had poor fundamentals. Further examination revealed that connected entities were pushing stock prices for all the companies. This trading group also bought most of the shares from preferential allotees who had received them during the pre-IPO days. It was also learned that the trading group was receiving funds from several sources to do this. For example, one Ashvin Verma reported an annual income of Rs.1.81 lakh in financial year 2012-13 but received around Rs.38 crore between 12 September 2013 and 9 August 2014 from three different entities, which was later transferred to a stock broker. But why will someone give money to someone else to buy shares, and that too in companies that have no fundamental backing? As the market regulator discovered, the entire setup was created to make use of the stock exchange platform and misuse laws. Money was given to a set of participants to inflate stock prices and create a profitable exit route for investors who had received preferential allotment before the IPO.

“From the above facts and circumstances, I prima facie find that the preferential allottees, pre-IPO transferees acting in concert with Funding Group and Trading Group have used the stock exchange system to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine ones,” said Rajeev Kumar Agarwal, whole time member, Sebi, in the order dated 29 June 2015, which banned 239 individuals and entities from the capital market till further direction. Sebi is also of the view that all this would not have been possible without the involvement of promoters and directors of these companies. Agarwal observed that all this was done to create fictitious LTCG, so that the unaccounted money of preferential allottees is converted into accounted funds and income can be shown from a legitimate source, the stock exchange. Funds were provided to the trading group through layers of transactions, so that the people and entities who got shares in the preferential allotment and transfers before the IPO could exit profitably.

As a result, according to Sebi, all the preferential allottees and pre-IPO transferees, together made a profit worth Rs.614 crore.

In response to Mint’s query about this case, a spokesperson of the Central Board of Direct Taxes said in an email, “Necessary action is being taken by the jurisdictional authorities in the Income Tax Department in the cases found actionable as per provisions of the Income-tax Act, 1961. Requisite coordination with Sebi is also being done wherever required.”

Will changing tax laws help?

In order to avoid such misuse of the stock exchange platform in future, the BSE suggested in the letter mentioned earlier that differential treatment of capital gains in listed and unlisted companies be removed. “Going by Sebi’s observations, there is a strong case for removing exemption on long-term capital gains tax as it is being used to evade taxes,” said Ashishkumar Chauhan, managing director and chief executive officer, BSE.

But not all are with the exchange on this suggestion. Prithvi Haldea, chairman and managing director, Prime Database, for example, said that the tax exemption on LTCG is for a reason and is a well thought out policy decision. “The problem is with law enforcement. You can change the tax laws but people will find some other way. My view is that surveillance and enforcement should be increased, and fear of punishment should work as deterrent,” added Haldea. Others are in agreement. “My response is that it (suggestion to remove exemption) is unfair to a large number of ordinary investors. We have a small investor base and the exemption is an excellent motivation,” said C.J. George, managing director, Geojit BNP Paribas Financial Services Ltd, adding that stock exchanges should improve their surveillance system. Dinesh Thakkar, chairman and managing director, Angel Broking Pvt. Ltd, also said that there is a need for processes that act as deterrents and remove people who use the system to evade taxes. “We have to follow the process that we are following. Since equity is a risky asset class, people need invectives to invest,” he added.

Clearly, what the regulator has exposed is a problem that’s too big and runs too deep to be contained by simply changing tax laws. For investors, this case once again reinforces an argument that has been consistently highlighted in these pages—that individual investors should stay away from investing in small companies as these are difficult to follow and prices can be manipulated.

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CHINA LOCALS vs GLOBAL FIIs

China stock brokers set up $19 billion fund to stem market rout

The 21 brokers led by Citic Securities will invest the equivalent of 15% of their net assets as of the end of June, or no less than ¥120 billion in total

Beijing: Chinese brokerage firms have come together to set up a stock-market fund, the latest effort to stem the biggest three-week drop in China’s key share index since 1992.

The 21 brokers led by Citic Securities Co. will invest the equivalent of 15% of their net assets as of the end of June, or no less than ¥120 billion ($19.3 billion) in total, the Securities Association of China said in a statement on its website Saturday. The fund will invest in blue-chip exchange- traded funds, it said.

The move comes after measures to shore up equities failed to stop margin traders from unwinding positions at a record pace, with the market losing more than $2.8 trillion of value in three weeks. The People’s Bank of China cut interest rates last week, while margin-trading rules were eased and trading fees were cut Wednesday.

The new fund to bolster equities may have only “a fleeting effect when daily turnover has reached ¥2 trillion”, according to Hao Hong, China equity strategist at Bocom International Holdings Co. in Hong Kong.

“This ¥120 billion won’t last for an hour in this market,” Hong said by phone from Beijing Saturday. “It might benefit blue-chip stocks, as investors may see them as value, but the bursting of the bubble in small-cap/tech stocks is likely to continue.”

Small-Cap stocks

The ChiNext index of smaller companies in Shenzhen traded at a record 131 times reported earnings last month — five times the level of the Shanghai Composite Index -- after tripling over the past year. The gauge had lost 33% from its 3 June peak as of Friday, trimming this year’s gains to 77%.

“The market’s most acute concern is still these smaller cap stocks, as investors levered up to buy them and now margin lending curbs hit them the hardest,” Hong said. “With their valuation in the stratosphere, nobody is willing to step in and bolster these stocks.”

The brokers on Saturday pledged not to reduce any proprietary investments in the equity market as long as the Shanghai Composite Index stays below 4,500, the association said; it closed Friday at 3,686.92. Listed brokers will actively buy back outstanding shares, while encouraging their parent companies to increase holdings, according to the statement.

The group of 21 brokers said the economic fundamentals that had justified the stock market’s rally before the rout hadn’t changed.

“It is therefore our duty to unite in stabilizing this market,” the statement said.

Li-Gang Liu, chief China economist for the Australia & New Zealand Banking Group Ltd., said the market would eventually find its own level.

“If a listed company thinks its shares are undervalued it could buy back shares. Such purchases shouldn’t be triggered by any kinds of administrative calls,” he said. “I believe the market is still under big downward pressure.”

There remain additional steps the government could take to support the market. China’s central bank-affiliated Economic Observer reported last week the government is considering reducing the stamp tax, while the finance ministry said it will allow the national pension fund to invest in shares.

On Friday, China’s securities regulator said it will limit the number of initial public offerings this month and revise rules to encourage foreign investment in the market. Chinese media reported that a unit of China’s sovereign wealth fund has been buying exchange-traded funds in the past week to support the market. Bloomberg

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