Decision Making in Volatile Market

The stock markets have gone up significantly over the last few quarters. The markets have been volatile during this run-up phase and had a couple of profit booking correction phases. Profit booking (or exit) is a very sensitive factor and the decision to book profits is personal to an investor. Many investors are sentimental about their investments and therefore miss an opportunity to book profits (or cut loss) at the appropriate time.

These are some strategies for investors to book profits and avoid missing out on opportunities: Set target and phase exit Booking profits at regular stages is one of the most basic strategies. Wealth managers suggest maintaining a 'book profits' and 'cut loss' target on investments and keeping track of them. However, many investors do not follow it or lose track of the targets.

It is therefore advisable to keep booking profits regularly, whenever the price moves significantly. Smaller milestones can be set in steps of 10 to 20 percent price movements.

Regular selling and booking profits enables investors to average out the opportunities and use them in a systematic manner.

Identify sell signals:

Identifying sell signals is a bit more difficult. This takes time and investors need to keep tracking developments around their sectors and markets in general.

These are some of the basic but important factors that investors can track to identify signals for profit booking: Quarterly results Investors can track the quarterly results of companies.

Sometimes, the results clearly indicate the business conditions and challenges, which indicate a clear-cut sell signal. At other times, investors should research deeper to figure out a way forward from the management interviews, analysts' views, etc.

Market trends:

The market is divided into various sectors. These sectors have well-defined trends based on past data. The general performances of stocks from various sectors vary according to the market conditions.

For example, FMCG and pharma are treated as defensive sectors. These stocks perform well in negative market conditions whereas they under-perform during good market conditions.

Similarly, there are different tendencies for different sectors, and investors can take a decision based on the general market and sectoral conditions.

Sharp run-up:

If a stock runs up significantly in the short term, it can be treated as a signal for profit booking. Most of the time, investors do not book profits (or exit) due to their sentimental attachment to a stock and lose an opportunity.

In case an investor can't make an exit decision, he should look at opportunities to book part profits at least. This helps in making best use of an opportunity.

Be objective:

Investors should be careful while investing in equity-related instruments, especially if they are investing in stocks themselves. It is important to put emotions and sentiments out of the way while taking decisions (especially exit decisions) related to investments.

Sometimes, in case of bad investments, the investor should be ready to take a cut and make a loss exit. This hard move enables him to protect the capital which can be reinvested in stocks or instruments with better prospects of growth, rather than losing the entire capital in a bad investment.

Src:http://techyyum.blogspot.com/2010/06/decision-making-in-volatile-market.html

Reliance Life Insurance introduces Mobinsure

Reliance Life Insurance has announced the launch of unique mobile-based insurance initiative — ‘Mobinsure’ — a mobile portal offering a range of insurance related services on mobile phones. This service would make it easier for the policyholders to track their policies and premiums, do fund switches, pay insurance premium and resolve policy-related queries instantly using their web-enabled mobile handsets. It would be available both on CDMA and GSM platforms, the insurance company said in a statement.

Customers can log on to their Reliance Life Insurance accounts on their mobile handsets and get important information on policies, applications, funds, profile, advisors and also activate online transactions, including premium payments, future allocations and change of address, free of cost. Customers are required to register first time and key in their policy and personal details which will be validated against customer details submitted at the time of new business for security reasons.

Reliance and RNRL pact.........

MUMBAI -- India's Reliance Industries Ltd. and Reliance Natural Resources Ltd. Friday signed a revised gas supply pact, a month after an apex court order settled a five-year dispute between two of the country's biggest corporate houses.

Reliance Natural will now ask the federal government to allocate natural gas in a step towards implementing the pact, it said in a regulatory filing.

The gas supply master agreement complies with the Gas Utilization Policy and EGOM (empowered group of ministers) decisions, Reliance Industries said in a statement.

India's highest court on May 7--while ruling on a dispute between the two companies on a gas supply agreement--asked them to start negotiations in eight weeks' time on a pact within the framework of government policy regarding price, quantity and tenure for the supply of gas.

The talks had to be completed within six weeks of their commencement.

The Supreme Court of India ruled that a private natural gas supply agreement between the billionaire Ambani brothers wasn't binding and that the two companies had to agree to a state-set price.

The ruling allowed the Mukesh Ambani-controlled Reliance Industries, India's largest company by value, to sell natural gas from the D6 block in the Krishna Godavari basin off India's eastern coast at $4.20 per million British thermal units--as set earlier by a federal government panel.

Anil Ambani's Reliance Natural wanted to pay $2.34, citing a family agreement signed in June 2005 when the brothers divided the petrochemicals-to-telecommunications empire of their late father, Dhirubhai Ambani.

According to the pact between Mukesh--the world's fourth-richest man--and younger brother Anil, Reliance Industries was to supply 28 million metric standard cubic meters a day of gas from the D6 block at $2.34 per mBtu to Reliance Natural for 17 years.

Shares of Reliance Natural jumped after the news, while Reliance Industries shares stayed neutral.

"It is positive for RNRL as this pact makes it certain that their power plants will receive gas. However, for Reliance Industries, it does not make any difference," said Saeed Jaffery, analyst at Ambit Capital.

IMF proposes global bank tax plans

The International Monetary Fund has proposed two new global taxes on banks and other financial institutions to cover the cost of future bailouts, the BBC reported.
The measures would see all institutions pay a bank levy as well as a further tax on profits and pay, which would aim to protect against future financial meltdown, said the broadcaster Tuesday, citing a leaked IMF report.

Governments of the Group of 20 advanced and developing countries -- which account for more than 85 percent of the global economy -- received the documents Tuesday, said the BBC.

Finance ministers would discuss the proposals this weekend, it added.
Insurers, hedge funds and other financial institutions would also be required to pay the taxes under the IMF proposals, despite the fact they were less implicated in the recent financial crisis.

This was to prevent banks reclassifying activities they currently carry out as other services -- such as insurance or hedge-fund services -- in an effort to avoid the levy.

The general levy, called the "financial stability contribution," would start at a flat rate but would eventually be changed so businesses judged to be riskier paid more, said the broadcaster.
Several proposals have been put forward by different governments to cover the costs of future economic rescue packages, including a tax on financial transactions.

But many have been reluctant to unilaterally introduce taxes to pay for future bailouts, believing coordinated action is the only option.

If governments acted alone, it is feared that institutions would simply move their operations to places with less stringent financial regulation.
The IMF report, which will form the basis of a submission to the G20 summit in June, states international cooperation in the introduction of the new levies would be "beneficial".

"Countries' experiences in the recent crisis differ widely and so do their priorities as they emerge from it. But none is immune from the risk of a future -- and inevitably global -- financial crisis," it said.
"Unilateral actions by governments risk being undermined by tax and regulatory arbitrage."

Britain has been pressing for the introduction of a global bank tax, and Finance Minister Alistair Darling welcomed the contents of the leaked IMF proposals.
"The recognition that banks should make a contribution to the society in which they operate is right," he said.
Prime Minister Gordon Brown told the Financial Times newspaper earlier this month that the large economies were getting closer to a deal.


Britain, France and Germany were broadly agreed on the need for a levy, Brown told the paper, adding he hoped the United States would join them.
The leader said he wanted a deal to be struck at the G20 summit in Seoul in November.

Is Spain A Dead Economy Walking

Barring an economic bailout of mammoth proportions, the economy of Spain is completely and totally doomed. The socialist government of Spain is drowning in debt, unemployment is running rampant and everywhere you turn there are major economic problems. So will Spain be the next Greece? No. When the economy of Spain implodes it is going to be a whole lot worse for the world economy. The economy of Spain is more than four times the size of the economy of Greece.
Spain accounts for 11.5 percent of eurozone GDP while Greece only accounts for approximately 2.5 percent. Spain is the 4th largest economy in the 16 nation eurozone and it is the 10th largest economy in the world. If the economy of Spain fails it will cause a shockwave that will be felt in every corner of the globe. In fact, there are quite a few analysts that believe if Spain defaults it would ultimately lead to the breakup of the eurozone.

So will the EU step up and bail out Spain? Well, there are rumors that EU officials have begun work on a bailout package for Spain which is likely to run into the hundreds of billions of dollars, but on Monday the European Commission, the Spanish government and the German government all denied that the European Union was preparing a bailout for the Spanish economy.

Of course we all know that politicians don’t always tell us the truth.
So who knows what is going on over there right now.
But the reality is that the economy of Spain is not going to make it much longer without serious help, and some EU officials are already using apocalyptic language to describe what an economic collapse in Spain would mean.

For example, EU Commission President Jose Manuel Barroso recently warned that democracy could completely collapse in Greece, Spain and Portugal unless urgent action is taken to tackle the burgeoning European debt crisis.'

So could democracy actually fail in those nations?

Well, considering the fact that Greece, Spain and Portugal only became democracies in the 1970s, and that all three of those countries have a history of military coups, such a scenario is not that far-fetched.
Without a doubt there would be serious public unrest in those nations if public services collapsed because their governments ran out of money.
So are there signs that the economy of Spain is about to collapse?
Well, yes, there are quite a few of them.

The following are reasons why Spain is a dead economy walking….

1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren’t working they can’t pay taxes and they can’t provide for their families.

2) In an effort to stimulate the economy, Spain’s socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition.

3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating. These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can’t afford to pay more interest on their debt.

5) There are 1.6 million unsold properties in Spain. That is six times the level per capita in the United States. Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

6) The new “green economy” in Spain has been a total flop. Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a “green economy” would result in a flood of “green jobs”. But that simply did not happen. In fact, a leaked internal assessment produced by the government of Spain reveals that the “green economy” has been an absolute economic nightmare for that nation. Energy prices have skyrocketed in Spain and the new “green economy” in that nation has actually lost more than two jobs for every job that it has created. But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

7) Spain’s national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy. If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues. But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default. The truth is that the Spanish government is caught in a “no win” situation.

8) But even now the IMF is projecting that the Spanish economy is going nowhere fast. The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent. As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain’s economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily. In fact, there is likely to be some very serious social unrest before all of this is said and done. On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. But that was only an appetizer. Spain’s two main unions are calling for a major one day general strike to protest the government’s planned reforms of the country’s labor market. The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain. In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain’s socialist government will be forced to call early elections.

So what is going to happen in Spain?

The truth is that nobody can predict for sure how things are going to play out over the coming weeks and months.
But what everyone can agree on is that the stakes are incredibly high.
Speaking at the World Economic Forum in Davos, Switzerland, world famous economist Nouriel Roubini put it this way: “If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster.”
But right now the entire population of Spain (along with much of the rest of the world) is completely distracted by the World Cup. As long as the Spanish team does well, that is likely to keep the Spanish population sedated. But if the Spanish team gets knocked out of the tournament early that will put the entire Spanish population in a really, really bad mood and that could mean a really chaotic summer for the nation of Spain.

IRDA to raise risk cover , ULIPs all set to offer guaranteed returns

India’s insurance regulator—the Insurance Regulatory and Development Authority (IRDA)—boosted by a clear mandate from the government to regulate unit-linked insurance plans (ULIPs), will unveil new rules soon to raise the risk cover and to lower charges to make this product more attractive to investors.

In what could potentially be a game changer, ULIPs are set to offer guaranteed maturity benefits to protect policyholders even when markets crash, said a senior official in the regulator’s office.

The aim is to encourage long-term savings and help policyholders build a nest egg to cater to their needs as they grow old. Insurers now offer guaranteed returns only on pension policies that are not sold on a unit-linked platform.

“We will revise the guidelines for ULIPs to make it attractive for investors. Insurers will also be given more time to redesign these products,” IRDA chairman J Hari Narayan told ET. Over the weekend, the government promulgated an ordinance to bring ULIPs under the regulatory purview of IRDA.

“It is best to give customers the option because if a guarantee is provided, the risks will be lower and hence returns will also be lower,” said GV Nageshwara Rao, CEO of IDBI Fortis Life Insurance. Pension plans will now have to be bundled with a life cover or a health cover or annuities. Insurers can offer all three, but at least one will be mandatory. IRDA is also planning to prescribe the minimum health cover for policyholders.

For pension plans, the insurer has to convert the accumulated fund value into an annuity at maturity. The policyholder or the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum on maturity. If the policy is surrendered, the policyholder will get only a third of the surrender value. Further, the policy holder will have to buy an annuity for the remaining amount.

Who wins and who loses with new yuan

China’s signal that it will let its currency appreciate is a boost to consumer firms, airlines and insurers, but may dampen the outlook for exporters and commodity producers.

The immediate winners from a yuan revaluation would be companies that buy raw materials and other inputs overseas, such as airlines purchasing jet fuel and automakers sourcing parts.

Chinese exporters are likely to be the hardest hit. A relatively mild yuan appreciation against the U.S. dollar of about 5% would cause losses at these companies, says a Reuters poll conducted at China’s top trade fair in April. Following is a list of some likely winners and losers from any yuan appreciation.

CHINA AIRLINES - WIN

China’s three top carriers, Air China, China Eastern Airlines and China Southern Airlines, which borrow in foreign currencies to pay for their aircraft but generate revenue in yuan, could benefit the most. Airlines also use dollars to buy fuel.

Deutsche Bank estimates a 1% yuan appreciation would boost Air China’s 2010 net profit by more than 10%, China Eastern Air’s by 15% and China Southern Air’s by 20.6%.

AUTOMAKERS - WIN

Foreign automakers which sell cars in the world’s largest vehicle market, such as BMW, Volkswagen, General Motors, PSA Peugeot Citroen, the Renault-Nissan alliance and Fiat, should also gain.

BMW would benefit the most if the yuan continues to rise against the euro — an outcome that’s far from certain — as its auto manufacturing joint venture with Brilliance China imports about half its parts, mainly from Germany.

FOREIGN COMMODITY FIRMS - WIN

Commodity prices jumped to a five-week high after China, the world’s third-biggest economy, eased its currency peg to the dollar, spurring bets that global demand for energy, industrial metals and crops will increase.

The reason is simple: A stronger yuan increases buying power.

Ending the currency peg will help curb inflation and shift investment toward service industries from exports and manufacturing, the People’s Bank of China said. The country is the world’s biggest consumer of copper, soybeans, pork and cotton and the second-largest user of corn and sugar.

CONSUMERS, TECHS - WIN

U.S. firms such as General Electric and Proctor & Gamble are likely to make currency-exchange gains when their China profits are converted into U.S. dollars.

A spokeswoman for GE, which makes many of the products it sells in China in that country, said the U.S. conglomerate does not expect “any material impact” to its earnings from the change.

U.S. furniture retailer Ethan Allen Interiors Inc. believes the move will be either neutral or positive, chief executive Farooq Kathwari said at the Reuters Global Retail Summit in New York.

Yum Brands Inc., which owns the KFC and Pizza Hut fast-food chains and generates more than one-third of its profits from its 3,500 locations in China, regards the move as good news, said spokesman Jonathan Blum.

“China represents our No. 1 growth opportunity and we expect this to be a very positive development over the long-term,” Mr. Blum said.

FOREIGN HEAVY MACHINERY MAKERS - WIN

The world’s largest maker of earth-moving equipment, Caterpillar Inc., could be a major winner. The U.S. machinery giant sells billions of dollars worth of machinery and products to China each year. Its group president said on Saturday that Beijing’s move would help lift U.S. exports.

Second-ranked Komatsu said that every 1% rise in the yuan would boost its operating profit by ¥1.1-billion (US$12.1-million).

LUXURY FIRMS - WIN

A firmer yuan would likely boost other Asian currencies as a strong yuan is seen by investors as a pledge of confidence for Asia’s growth. That should help luxury goods makers, whose imported products will be cheaper across the region, just as more Asians benefit from increased wealth.

At the top of the list are those luxury goods companies for whom Asia is a key market, such as Tiffany & Co., Bulgari SpA, Hermes International SCA and LVMH Moet Hennessy Louis Vuitton.

CHINESE FINANCIALS - WIN

Chinese insurance companies such as China Life and Ping An Insurance should benefit as a yuan revaluation is expected to boost China’s domestic A-share stocks, which account for a large chunk of their investment portfolios.

Chinese insurers can put up to 25% of their total investable assets into stocks, but most keep it below that level.

FOREIGN RETAILERS - LOSE

Big retailers that source from Asia, such as Hennes & Mauritz, Target and Wal-Mart Stores Inc., would see a firmer yuan push up their production costs.

It could also hit Walt Disney Co., which has signed a memorandum of understanding to build an amusement park in Shanghai, as it would have to spend more in U.S. dollars to fund investments.

Aeon Co Ltd. said yuan appreciation would have an impact as Japan’s second-biggest retailer imports a large percentage of its products from China. Spokesman Eiichi Yamatani said Aeon would continue to diversify its product manufacturing base due to rising labor costs in China.

COMMODITY FIRMS - LOSE

China’s commodity producers could be hardest hit over the longer term.

Companies such as Aluminum Corp. of China, Zijin Mining and PetroChina face dollar-linked prices for their output, but their costs are in yuan.

If the yuan does strengthen, these firms would find their revenues falling while their costs remain steady.