Companies & Sectors
Kingfisher fails to provide details on financing revival plan

Kingfisher CEO met DGCA but again failed to provide any details on its funding or about any commitment by the airline’s parent company, UB Group, on financing the carrier’s revival plan

New Delhi: Vijay Mallya’s grounded Kingfisher Airlines on Wednesday made another attempt to convince Director General of Civil Aviation (DGCA) on its revival plans, but failed to provide any details on its funding which the aviation regulator wanted, reports PTI.

 

Kingfisher CEO Sanjay Agarwal met DGCA Arun Mishra for 45 minutes to apprise him of the prevailing scenario facing the airline, but sources said he gave no information about any commitment by the airline’s parent company, UB Group, on financing the revival plan.

 

The sources said Agarwal told the regulator that the airline would be ready to resume operations from the Summer Schedule, which begins in April.

 

The Kingfisher chief said the airline has not received no-objection certificates from any of the airport operators, including the Airports Authority of India (AAI), though he claimed that some of the oil companies and aircraft leasing companies have given it a go-ahead.

 

Today’s meeting comes days ahead of a crucial meeting of a consortium of bankers that have lent over Rs7,500 crore to the now defunct airline.

 

The consortium has been refusing to lend any more money to the airline till the promoters bring in more funds. The airline suspended operations on 11th October last year and its operating licence lapsed on 31st December.

 

In the recent past, civil aviation ministry officials had made it clear that they were not satisfied by Kingfisher’s plans to invest Rs650 crore as it might not guarantee efficient and reliable services.

 

“The revival plan, which was submitted by the airline, had lot of issues regarding lenders and staff payment which we felt may not lead to reliable services,” a senior officer had said, adding it had no provision for payment to airport operators.

 

Salaries and allowances of the staff have also been pending for over eight months now, while the airline owes money to airport operators, oil companies and other vendors.

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HSBC’s Russia Equity & Asia Pacific (Ex-Japan) Dividend Yield Fund: Two more foreign schemes

HSBC MF plans to launch two foreign schemes. Moneylife has shown in the past that these schemes offer no clear edge when it comes to diversification


At a time when foreign institutional investors are flooding the Indian market and Indian equity mutual fund investors are withdrawing their investments, HSBC Mutual Fund plans to launch two global schemes—HSBC Russia Equity Fund and HSBC Asia Pacific (Ex Japan) Dividend Yield Fund, hoping Indian investors would be willing to put their money in foreign equity. Both these schemes will invest in the units of schemes of HSBC Global Investment Funds. HSBC Russia Equity Fund will invest in the units of HSBC Global Investment Funds (HGIF) Russia Equity Fund and the other scheme will invest in the scheme of HSBC Global Investment Funds (HGIF) Asia Pacific Ex-Japan Equity High Dividend Fund.
 

We have repeatedly written about global schemes earlier which have had a lacklustre performance in the past. At present, we have 36 global funds; of which as many as 21 of these were launched during 2007 and 2008—the period when foreign funds had become a fad. When they were launched, Moneylife had pointed out that these funds were marketing gimmicks. Our advice was to stay away from these funds.
 

In a recent analysis, we showed that out of 22 global schemes that were launched prior to January 2009, just four outperformed the BSE 200. (Read: Global Funds: Lacklustre performance) In fact in the last one-year period ended December 2012 when the BSE 200 returned 30.80%, just two global schemes managed to do better.
 

Funds that put your money in other countries don’t necessarily offer much diversification. In fact, markets around the world have been moving in sync. Some of these schemes have been highly correlated with the Sensex.
 

The new schemes would essentially invest in schemes that are managed by the fund managers of HSBC Global Investment Funds. Neither of the two foreign schemes have a long-term track record. HSBC Global Investment Funds-Russia Equity was launched in December 2007. According to data available on Bloomberg, over the last three years it delivered a return of -2.01%. Over the last one year the scheme returned 7.71%. The performance of the scheme will be benchmarked to the MSCI Russia Index. HSBC Global Investment Funds-Asia Pacific ex-Japan Equity High Dividend is a relatively new scheme, being launched in March 2011. Over the last one year the scheme delivered a return of 17.66%. The performance of this scheme will be benchmarked to MSCI AC Asia Pacific ex-Japan.
 

The fund management of HSBC Mutual Fund in India has not done too well. Schemes of HSBC Mutual Fund have regularly come up in our performance analysis of equity schemes for all the wrong reasons. Some of its schemes have performed poorly in the last few years.

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Self-defeating behaviour of stock investors

Investing is simply a struggle for self-control. You can’t control what the market does, but you can control what you do in response. Your returns depend less on whether you pick good investments than on whether you are a good investor

“If you don’t know who you are, the stock market is an expensive place to find out who you are”—
Adam Smith, The Money Game
 

Successful investing is not easy because it requires discipline and patience. You need to hold on to your stocks for long periods of time. But, it is simple, it is all about commonsense. However, people have let themselves down frequently by buying high and selling low. In euphoric times, people load on stocks as if there is no tomorrow and end up losing money on them. 

 

Investing is simply a struggle for self-control. You can’t control what the market does, but you can control what you do in response. In the long run, your returns depend less on whether you pick good investments than on whether you are a good investor. 

 

Self-defeating behaviour

Research in the field of ‘Behavioural Finance’ has shown that most people get into trouble while investing in stock markets because their emotions interfere with rational thinking and decision making.

 

Here are seven of the irrational tendencies that cause trouble while investing in the stock markets.

  1. Overconfidence: Errors in judgment happen because people are generally overconfident. They exaggerate their own skills and end up taking more risks as they become overconfident about their guesses and over-optimistic about their prospects. It can be particularly damaging while investing in stock markets and in managing our own financial affairs.
  1. Investor myopia:  People put too much emphasis on few chance events thinking they have spotted a trend where none exists. When people see something happen for two or three times in a row and just assume it is going to happen again. It is a flawed tendency to invest in something that has been going up fast in the assumption that it will keep going up fast.
  1. Loss aversion: As studies conducted by Kahneman and Tversky in 1979 found, “the pain of a loss is twice as much as the pleasure of an equivalent gain”. For example losing an amount of Rs5,000 hurts 2 to 2.5 times more than winning Rs5,000 feels good. It is this aversion to loss that makes investors unduly conservative and at a great cost to themselves.
  1. Overreaction bias: People tend to overreact to bad news and react slowly to good news. Thus, if the short-term performance is not good, the typical investor’s response is a knee-jerk reaction; it is an abrupt and ill-considered reaction. When some bad news hits, markets crash drastically because investors sell out and scamper for safety.
  1. Herding tendency: It is irrational investor behaviour that is driven by greed during times of euphoria and fear in the crashes. When an individual investor tries to join the crowd of others in the rush to get in or out of the markets, he will get trampled.

You may also want to read A simple investment that really works

  1. Buying high and selling low: You are inclined to buy high and sell low because you are averse to the risk of looking bad to yourself and your dear ones. You would want something with the best performance to go into your portfolio and you would want whatever has worst performance to be coming out—because at the time of the decision it will make you look better. Or, if you buy because the market has gone up and sell because the market has gone down. This way you end up buying when prices are up and sell when prices are down. You can never make your share of returns by buying high and selling low—you can only lose.
  1. Market timing: For most investors it is not possible to make money by anticipating the future course of the stock market. In the roller coaster days of the stock market, who knows what is up or down? You never know what is going to happen next. The BSE Sensex could be 250 points up today and 300 points down the next day. It is a loser’s game trying to profit from speculating on the market movements. If your emphasis is on market speculation, you will end up with losses and unhappy consequences of a stock market speculator.

As Benjamin Graham, one of the greatest investors said, “The investor’s chief problem—and even his worst enemy—is likely to be himself”. You can win your battle for investment survival by avoiding these self-destructing tendencies.

 

To read more on stock market analysis done by Moneylife, click here.

 

(Nilesh Kamerkar is the managing partner of Capital Partner)

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COMMENTS

Suiketu Shah

4 years ago

Nice article.However,all the above theories are good in pricipal but wealth management companies and most MF agents make you do just the opposite in atleast 3-5 purchases especially as regards timing.
They boast about their knowledge but when they sit across the table they dopnot even know basic of one of the most impressive growth companies in the recent past-VST Industries.

I read someone writing on ml saying good stocks are hard to find.Good stocks are very easy to find if one reads only ml.

REPLY

Nilesh KAMERKAR

In Reply to Suiketu Shah 4 years ago

Thank you Mr.Shah, appreciate your feedback.

Suiketu Shah

In Reply to Nilesh KAMERKAR 4 years ago

Most welcome Mr Kamerkar:)
Suketu

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