2007 | Dalal Street

EMI for Home Loan Borrowers up by 26%

February 18, 20071 min read

DalalStreet.Biz has a calculation of how rising interest rates by the RBI has raised the EMIs of Indian home loan borrowers.

Loan Amount: Rs 25,00,000
Inception Jan – 1 – 2004
Floating Rate @ inception – 7%
Tenure of the Loan – 20 years
EMI at inception Rs 19,400

Since Jan-1-2004, the Indian central bank, Reserve Bank of India has hiked the interest rates 6 times. The table below shows how your EMI has shot up by 26% in 3 years.

Jan-2005, Interest Rate 7.5% EMI Rs 20,100
July-2005, Interest Rate 8.0% EMI Rs 20,800
Jan-2006, Interest Rate 8.5% EMI Rs 21,600
April-2006, Interest Rate 9.0% EMI Rs 22,300
July-2006, Interest Rate 9.5% EMI Rs 23,000
Feb-2007, Interest Rate 10.5% EMI Rs 24,500

Plus their is a blood sucking Service Tax on the part of interest paid to the bank.

Sure, our Real Estate Sector is headed for a trouble now.

Mutual Funds Review

Why Economic Times Mutual Fund Rating Sucks ?

February 16, 20071 min read

India’s leading financial daily, The Economic Times [09-Feb] has come up with a Rating on Mutual Funds. The ratings suck and we advise our readers who want to create wealth over long term not to follow the same.

Economic Times analyst rate, SCAM tainted and PSU influenced SBI as the best fund house. It has ranked 4 funds from the SBI stable at Platinum rank and none from Reliance Mutual Fund or Franklin Templeton India.

Also the best performing mutual fund in the Indian market which is the single largest fund organically grown and consistently performed, HDFC Equity Fund is missing out of the ranking.
Some Reliance Funds are slightly bigger in size of corpus than HDFC equity but they are all raised through New Fund Offering.

Their is no mention of Reliance Growth Fund, Reliance Vision Fund or Franklin Templeton Prima and Franklin Templeton Bluechip fund which are so far the best managed large diversified equity funds in the Indian market.

India IPO Reviews and Updates

Firstsource Solutions Allotment Status

February 16, 20071 min read

Firstsource Solutions IPO allotment has been done and shares will be credited soon into your demat account. Click here to check the allotment status of Firstsource IPO. Those who had applied for 1500 have been allotted firm 136 shares.

The listing price is expected to be around Rs 90 said a Mumbai broker.

Equity Research

Kotak Maintains BUY on AIA Engg

February 15, 20071 min read

Irrespective of what happens with the CRR, Kotak Securities has retained BUY rating on AIA Engineering with a price target of Rs 1520, 18% upside from current levels. AIA Engineering has reported good Q3FY07 results, which were in line with analyst estimates.

AIA Engg’s expansion plans are on track. The company plans to increase its capacities from 65,000 TPA to 115,000 TPA by end of March-2007 and increase rise further to 165,000 TPA by October-2007. To cater to the demand of mill internals, the company is setting up another 100,000 TPA plant for manufacturing high chrome mill internals.

The company has an order book of Rs 3.7 bn of which 55% is for exports.

AIA Engg is expected to earn EPS of Rs 52, 76 and 101 for FY07, FY08 and FY09 respectively. The price target for AIA Engineering is Rs 1520.

Economy, Markets and Macro Views

MindTree Consulting Subscribed 103 Times

February 15, 20071 min read

BSE and NSE finally shutdown their systems at midnight and till then they had received 577662585 bids against an offer of 5593300 subscribing the MindTree issue 103 times. We had a blind subscription rating on MindTree IPO.

The retail portion of the issue is subscribed by 30 times. The fate of Rs 1 Lakh application by retail investor will also be decided by lottery in the ratio of 1:2. Here is the breakup of subscription.

RBI Hikes CRR by 0.5% to 6%

February 13, 20072 min read

With the Indian inflation at record high, 6.58 %, the Finance Minsitry had no other option but to cool the overheated economy. The Reserve Bank of India, just minutes ago announced the hike in Cash Reserve Ratio by 50 bps to 6%. This hike would suck Rs 14,000 crore away from the system.

In order to manage short term liquidity crisis, RBI has proposed the CRR hike in two phases with the second phase to come into effect after Budget on March-3rd.

RBI in a press release said,

It may be recalled that in the Third Quarter Review of the Annual Statement on Monetary Policy for the year 2006-07, the stance of monetary policy was set out. The Review inter alia stated :

“Hence, a determined and co-ordinated effort by all to contain inflation without unduly impacting the growth momentum is not only an economic necessity but also a moral compulsion. To the extent the current inflationary pressures are attributable to monetary conditions, it is essential to undertake appropriate measures, in continuation of those already taken and in the light of anticipated developments.” (paragraph 77)

SBI CFO said that the lending rates will increase not just to the overheated Real Estate borrowers but also to all other borrowers. Banking stocks will be under pressure and the market correction is likely to continue tomorrow.

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