28 April 2013
FIIs invest $11 b in equities so far this year ::Business Line
Overseas investors pumped $823 million into the stock markets in the month of April, taking the total investment tally to over $11 billion in 2013 so far.
Foreign institutional investors infused a net amount of $823 million (about Rs 4,450 crore) in Indian stock market in March taking the total inflows to $11.2 billion (Rs 60,072 crore) in less than four months of 2013 so far.
FIIs had pumped in $1.2 billion (Rs 6,532 crore) during March, $4.57 billion (Rs 24,440 crore) in February and $4.05 billion (Rs 22,000 crore) in January.
Market experts said FII inflows in the Indian equities have slowed during April because of a slew of factors such as profit-booking, concerns over high current account deficit (CAD) and political uncertainty.
“We have seen FIIs pumping in funds in the Indian equity market during the month, but they are concerned about various economic factors such as CAD touching a record high and political uncertainty,” Geojit BNP Paribas Financial Services Ltd Head (Research) Alex Mathews said.
During April 2-26, FIIs were gross buyers of shares worth Rs 54,790 crore, while they sold equities amounting to Rs 50,340 crore, translating into a net investment of Rs 4,450 crore ($823 million), as per SEBI data.
Foreign fund houses also infused Rs 1,586 crore ($302 million) in the debt market so far this month. This takes the overall net investments by FIIs into debt markets to Rs 14,330 crore ($2.66 billion) in the current calendar year so far.
FIIs bought equities worth $24.4 billion in 2012, about $5 billion below record purchases two years ago.
As on April 26, the number of registered FIIs in the country stood at 1,766 and total number of sub-accounts were 6,372.
Big Four on Warren’s buffet ::Business Line
“Big four” is a term that usually refers to the big four accounting firms, but to Warren Buffett the term refers to his largest public holdings – namely American Express, Coca Cola, IBM and Wells Fargo. In addition to the fact that all the four companies earn high returns on capital employed and generate copious free cash flow, is there something else that they share - in terms of their intrinsic characteristics, business models and strategies that have made them the apples of Buffett’s eyes?
Here are a few key business factors that Buffett’s “Big Four” share among them–
Strong brand – Each of the four companies own brands with possibly the maximum recall within the territories and sectors they operate. They also possess a tremendous amount of accumulated trust that has been gathered over many decades of being in business. In fact the companies are so synonymous with the products/ services they provide that their names have become symbols of what they do and how well they do it. This results in most of their customers seeking out their product/ service (Pull) rather than vice-versa (Push). Any businessman would know the benefits of having the customer seek you out. It means the company can define the terms of the business – most important of which is pricing power – an outcome of stronger customer preference relative to competitors.
Decades of cumulative experience – Each of the businesses can be traced back to many decades – few of them nearly a century back - almost to the very origins of their respective commercial industries. Over the years these companies have not only survived and thrived amidst the vicissitudes of boom and bust (in their industries as well as the overall economy) to emerge as the leaders that they are today. During their evolutions they have survived many a misadventure but were able to re-orient themselves and become stronger – all these add to the significant repository of in-house knowledge and home grown culture that could hold them in good stead for decades to come.
Large customer base – Each of the businesses have substantially large customer base across individuals/ industries such that no single customer can determine the fate of its survival. The large customer base reduces volatility in revenues.
Leaders in their respective businesses – The group of four are leaders in their respective industries – if not by size definitely in terms of profitability.
International operations – All of them have significant international presence - either in terms of revenue source or cost centres (e.g. Amex, IBM, Well Fargo have large delivery/ operations centres in India to capitalise on cost advantages). Except Well Fargo, the rest have become truly global firms and can’t really be called American any more. This means less country risk and at the same time increased footing in developing economies that are likely to grow faster.
Large addressable market size and unlimited growth potential – The nature of the industries that they operate in provides them with unlimited growth potential across the world. Since both Amex and Wells Fargo are in the financial services business, their growth is expected to be faster than GDP growth.
Captive customer base – A combination of brand pull and high switching costs provides these companies with a customer base that is almost captive. This means any new customers that they acquire are accretive. The effect of this is relatively low marketing costs to retain existing customers (due to low risk of switching). Steady existing customers also provide annuity revenues through repeat purchase.
Retail tilt – Except IBM the other businesses have large diverse retail customer base, which helps mitigate individual customer risk and improve pricing power. Also, the retail tilt means dependency on consumption spending that is bound to increase and become a larger portion of GDP as economies develop.
Asset light – None of the companies can really be called as a pure-play manufacturing. All of them have low capital requirements relative to the revenues that they generate and this produces high capital turns that boosts ROCE (Return on Capital Employed).
Defensive businesses – For all the four businesses, the number of customers are likely to stay the same or increase during a recession – but for different reasons. In the case of Coke – the cost is immaterial for customers to reduce consumption during recession. Amex and Wells Fargo, are likely to witness an increase in customers/ business volumes during recessionary times on the lending front – however the effect could be offset by increased delinquency as well. For IBM, the needs for IT support to run core business operations make it less prone to suffering during recession.
Stock buyback – Lastly, the companies periodically buy-back their own shares as a way to utilise surplus cash and increase shareholder value. This helps them save on tax compared to dividend payouts.
Import tariff value of gold hiked to $472/10 grams ::Business Line
The Government has raised the tariff value of gold to $472 per 10 grams on account of a volatile price trend in global markets.
Tariff value is the base price on which the Customs duty is determined to prevent under—invoicing. It was only 10 days back that tariff value of gold was changed bringing it down to $449 per 10 grams due to weak global prices.
However, the import tariff value of silver has been kept unchanged at $762 a kg.
The notification in this regard was issued by the Central Board of Excise and Customs, an official release said.
The Government had cut the import tariff value of gold as international prices of the precious metal have started firming up after witnessing a sudden fall in last few weeks.
In Singapore, gold prices firmed up to $1,462 per ounce last week. Prices had also declined to $1,321 per ounce early this month.
As per trader estimates, gold imports are expected to rise by 20 per cent to around 183.6 tonnes in the April-June quarter of the current fiscal.
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