Sundaram MF floats Capital Protection Oriented Fund Series 2-3 years; Jubilant Energy plans $85-mn share sale; Keep ESI, EPF schemes out of service tax; Punjab & Sind Bank to launch IPO in first half of December
Sundaram MF floats Capital Protection Oriented Fund Series 2-3 years
Sundaram Mutual Fund has launched Sundaram Capital Protection Oriented Fund Series 2-3 years, a close-ended growth fund.
The objective of this scheme would be to seek income and minimise risk of capital loss by investing in a portfolio of fixed income securities. The scheme may invest a part of the assets in equity to seek capital appreciation. The scheme has tenure of three years with capital protection orientation at maturity. The scheme offers only growth option.
The new issue closes on 30th November. The minimum investment amount is Rs5,000. The minimum targeted amount is Rs1 crore. The scheme will be benchmarked against CRISIL MIP Blended Index. The scheme shall be managed by Dwijendra Srivastava (debt portion) and S Krishna Kumar (equity portion).
Jubilant Energy plans $85-mn share sale
Indian oil explorer Jubilant Energy would raise $85 million through institutional placement and plans to get listed on the London Stock Exchange (LSE) on 24th November. The company would place 69,379,430 new shares with institutional investors at 77 pence per share to raise gross proceeds of $85 million.
Jubilant Energy, engaged in upstream E&P (exploration and production), is also mulling the admission of its entire issued share capital to trade on the AIM market of the LSE, which is expected to take place on 24th November.
The proceeds of the listing would be used to expand Jubilant's exploration and development of oil and gas assets, and for general corporate purposes.
"The money we are raising will enable us to carry out our work programme targeting near term value enhancing opportunities in the region as well as some of the high-impact exploration potential across our acreage," Jubilant CEO Ajay Khandelwal said.
Jubilant is currently part of a diversified Indian business group (Wider Jubilant Group) founded by Shyam Bhartia and Hari Bhartia with a presence in approximately 50 countries and revenues of around $1 billion for 2009-10.
Keep ESI, EPF schemes out of service tax
The Labour and Employment Ministry has requested the Finance Ministry to keep Employees' State Insurance (ESI) and Employees' Provident Fund (EPF) schemes out of the ambit of service tax as they are social security schemes.
"If the provisions of service tax are made applicable to the ESI schemes, the cost of insurance will increase to the extend of service tax," the minister of state for Labour and Employment Harish Rawat said. He said his Ministry has requested the Finance Ministry to consider "exemption of ESI scheme and EPF scheme from the applicability of service tax".
Mr Rawat said this to a written question in the Lok Sabha. His reply came in the backdrop of the Department of Revenue sending demand-cum-show cause notice to ESI Corporation which considered the ESI schemes at par with general insurance business and stated that activities of ESI Corporation are within the ambit of Insurance Act, 1938 and hence service tax provisions are applicable to it. A similar notice has also been received by the EPFO.
Punjab & Sind Bank to launch IPO in first half of December
Punjab & Sind Bank said its initial public offer (IPO) is likely to hit the capital market in the first half of December.
Market regulator Securities and Exchange Board of India has already approved the draft prospectus filed by the bank for the IPO. The bank proposes to issue up to 4 crore fresh equity shares of Rs10 face value each at a price discovered through a 100% book building process. This would dilute the government's holding in the company by 17.9% and post-offer, its holding would come down to about 82%. At present, the government owns a 100% stake in the bank, which is the sole unlisted bank out of the 19 nationalised lenders in the country.
The proceeds from the IPO would be utilised for business expansion, adding that the funds raised would take care of the bank's credit growth requirement over the next two to three years. The book value of the bank stood at Rs119.5 at the end of September 2010.
To enhance employee participation in the IPO, Punjab & Sind Bank has opened demat accounts for every member of its 8,000-strong workforce. The bank proposes to reserve 20 lakh shares for subscription by eligible employees.
At the market peak of 21,000, Vishal Kampani predicted on CNBC that there will be no pullback. The market has crashed by more than 1,700 points after that confident prediction. Why are experts often wrong?
The daily parade of experts on Indian TV channels is more entertaining than enlightening. This is because the experts are often wrong. Most interestingly, exactly like the retail investors, they are often very bullish at the very top of a market rally and extremely pessimistic at the bottom.
The latest example of this is the comment by Vishal Kampani, MD of JM Financial, speaking to CNBC TV18 on 11th November. The channel asked Mr Kampani about his "own call on markets… do you think we still have got headroom out here or do you think we will get capped sometime soon?" To this question, Mr Kampani replied with supreme confidence: "We do have some headroom here. There is 10% upside case very easily possible driven by strong liquidity and global flows."
CNBC asked again, "Are you predicting some kind of a pullback? Is that possible because last time there was a mild pullback in October, which had stopped at 6,000 or just below it?" Mr Kampani was as emphatic and specific about this question too: "I don't expect the mild pullback in the short-term. The flows are very strong - even if you look at the macro-trends across the world, it seemed to be stable. There is obviously a QE2 happening in the US, which increases liquidity by almost $75 billion every month for the next couple of months. So the macro-trends are very strong. The only big risk factor can be China. If China has a significant slowdown - but I wonder what the policymakers can do in China to slow it down."
This conversation was being broadcast when the Sensex was just shy of 21,000. The very next day, the pullback, that seemed impossible, started.
The Sensex was down 432.20 points on the 12th. There was some rally (152.80 points on the 15th) the next working day, but the Sensex fell again on the 16th, an even bigger fall of 444.55.
Buyers simply disappeared. After further bouts of sharp decline, including today, the Sensex is at 19,691.84, a fall of 1400 points (on a closing basis and 1700 points on intraday basis) from the fateful day that Kampani predicted that there will be no pullback.
All this is no reflection on either the channels or on the experts. After all they mean well. And why blame Indian channels and Indian experts? It is the same all over the world.
The point is, "experts" are habitually poor predictors.
There are two reasons why forecasts are often wrong and those two factors often interact to create a bigger error. One, stocks do not follow fixed patterns, which leads to errors and two, the human mind is too prone to emotions while making predictions, especially about something that is uncertain. A million factors influence the market and these factors are ever-changing, leaving even the most experienced investors out of depth at times.
To this if you add typical human frailties like greed, hope, fear etc.; it is no surprise that many top investors and traders with decades of success and experience behind them have suddenly gone belly-up.
Experts have been wrong ever since they have been trying to predict. David Dreman, in his 1979 book Contrarian Investment Strategy, examined the forecasts of financial experts over 50 years starting in 1929. Dreman found that their forecasts consistently, dramatically underperformed. They beat the market just 23% of the time. Dreman gave many stunning examples. Here is one. At the end of 1971, Institutional Investor magazine polled more than 150 money managers in for their top picks. By end-1974, the experts' top 10 picks were down an average of 67%. In February of 1970 in a New York conference, fund managers were polled for what stock they thought would be the top performer that year. The favourite was National Student Marketing (NSM).
From its February high, the shares of NSM dropped 95% over the next five months! At the same conference, the experts said airlines would be the best performer. The airline sector fell by 50% that year.
People love forecasts. The more specific the figure and the more specific the date of occurrence, the more people are hooked. In the highly uncertain world of markets, certainty is a straw they hang on to desperately. This is why newspapers ask "experts" and TV channels poll brokers (of all people) to predict the Sensex next year.
It may be entertaining - but is useless for investment.
The most laughable is the brokers' research announcing short-term "target prices" on stocks. These short-term targets are rarely met but that does not stop the securities industry from continuing with the charade of dishing out these forecasts quarter after quarter because investors like to lean on these "target prices" as an additional confirmation of their purchase. There is a market saying which captures this well. Experts can predict a date. Or they can predict a move. But they can never predict a move by a given date.
Between 14 June 2006 and 8 February 2007, the Sensex was up 64%. Equity diversified growth...