Weekend links May 31st 2010

Posting has been light most of last week, and is likely going to be light for the next couple of weeks as well. Here are some links that I got time to check out during the week.

S&P 500 Trading Video @ Smarter Wallet

Build a loan portfolio with Lending Club @ Digerati Life

Five questions to build a strategy @ HBR

Wall Street CEO are nuts @ Baseline Scenario

ComScore is now free for startups @ Tech Crunch

How to pitch bloggers @ Pro Blogger

Why big businesses will never win over mom and pop shops @ Mint

How can Indian investors invest in Brazil?

A reader emailed me with this question today, and it got me interested to find out how an Indian investor can get exposure to Brazil.

First, I started off by searching how a retail investor can directly buy stocks in Brazilian equities, but that didn’t go anywhere. If anyone has any information on this – please share.

Next, I searched for mutual funds that help investors take exposure to Brazil. I have written about the HSBC Brazil Equity fund earlier, and though that fund is not yet launched, when it does get launched – it will be the most direct way for an Indian investor to get exposure to Brazilian equities. You can go to that post and read more about that fund.

I didn’t find any Brazil mutual fund that is currently open to Indian investors, but ING has a fund that is close. The ING Latin American Equity Fund is a fund that comes close.

This is a fund of funds, and the underlying fund is the ING (L) Invest Latin American fund. Here is the indicative asset allocation of the fund.

Maximum Allocation
Minimum Allocation
Risk Profile
ING (L) Latin America Fund 100% 65% High
Money Market Instruments 20% 0% Low to Medium
Other overseas mutual funds 35% 0% High

The underlying fund is benchmarked against MSCI EM Latin America 10/40 index. As of May 06 2010, the country weightings of the Index were as follows:

Country Number of Companies Weight
Brazil 75 68.5%
Chile 16 6.4%
Colombia 8 3.0%
Mexico 23 19.6%
Peru 3 2.5%
ING (L) Invest Latin America Fund 100 65 High
Money Market Instruments including
reverse repo
20 0 Low to
Other overseas mutual fund schemes 35 0 High

As you can see from the above table, Brazil forms the majority of this index and that’s the main reason I say this fund is the closest Indian retail investors have as a proxy to invest in Brazil.

This fund has returned 36% year to date, and before I end the post, let me reiterate that fund of funds charge double fees, once their own, and then they also incur the fees of the underlying fund.

If you know of a good way to get exposure to Brazil, then please do share.

Standard Chartered IDR

I wrote about the Standard Chartered IDR yesterday, and I thought I’d supplement that post with a little more detail about IDRs, since this is the first IDR ever, and there will probably be many more to come in the future.

What is an IDR?

IDR stands for Indian Depository Receipts, and Standard Chartered is the first company to come out with an IDR. StanChart derived 12% of its income from India in 2009, and India contributed $1.06 billion of its $7.23 billion operating profit last year, and that may have something to do with this first.

An Indian Depository Receipt is a way for a foreign company to raise money in India. The foreign company deposits its shares with a custodian, and then the custodian issues depository receipts based on these shares. To that extent, IDRs are derivative instruments because they derive their value from the underlying shares. In this case, Standard Chartered Bank, Mumbai is the domestic depository, and it has appointed Bank of New York, Mellon as its overseas depository.

Dividends related to IDR

For this particular issue, 1 IDR stands for one-tenth of a share, and any dividend declared by Stan Chart will be apportioned according to your IDR holdings, and distributed to you by the depository.

The same is true for Rights issues also. If Stan Chart announces a rights issue, you will have rights, similar to stocks, and there will be a price set in Indian rupees that you can pay to get into such issues.

If you are interested, then you have voting rights too, but there is no such thing as a tenth of a vote, ten IDRs will count towards one vote, 20 as two, and so on and so forth.

Taxation related to IDR

This is an interesting aspect because as I understand it, the current tax provisions put IDRs at a distinct disadvantage when compared with other common stocks.

For starters, dividend tax will be assessed at 30% (plus 10% surcharge) on all the dividends you get from these IDRs. Investors don’t need to pay any dividend taxes on other common stocks in India. The dividend taxes are paid by the company itself, and then the investor doesn’t have to pay any tax on it.

Next up, short term capital gains. On Indian stocks, the short term capital gains is charged at 15% plus surcharge, however in the case of IDRs, the short term capital gains will be charged at 30%.

Similarly, there are no long term capital gains on stocks in India, but in the case of IDRs – investors will need to pay a 20% long term capital gains plus 3% surcharge on IDRs.

That is a pretty significant hit right there, when compared with other stocks. There is one important point relating to these taxes, and that is the Direct Tax Code, which is expected to be implemented next year. That will change a lot of things, and by the time you think about selling these IDRs, the tax situation might look completely different.

The other thing about this is that these IDRs will not attract any Securities Transaction Tax (STT), which is a good thing, but my guess is that it isn’t that big a deal.

If someone has a different understanding, is an expert in this area, or just has an opinion – I’d love to hear your views about the tax implication on IDRs.

Listing gains related to IDR

This is another interesting aspect related to IDRs. The way they are being sold is quite similar to an IPO, and most Indian investors interested in IPOs are looking to cash out in the first few days of listing, and hope that the IPO lists at a significant premium to the issue price.

I don’t think this is going to be the case for IDRs because the company already has stock trading in other markets (in Stan Chart’s case – UK and Hong Kong), and there are players like hedge funds who will arbitrage on the price difference in the various markets and make sure the IDR doesn’t run away in price. Unless something happens that influence the stock price between the issue time and listing time, there may not be much in the way of listing gains.

So, there you have it, a summary of the important points of IDRs. For now, I think the tax implication is the most important when thinking about investing in IDRs, but that will probably change in the next few months with the Direct Tax Code kicks in, and the playing field levels out.

Standard Chartered India IPO

Update: Soon after I published this post I saw that Business Standard reports that the IDR will be priced between Rs. 100 and Rs. 115, and BL has a good article about this IDR as well. I think you should read those two stores instead of spending more time here.

I was going through the NSE website today, and saw the Standard Chartered Red Herring Prospectus there for an IPO that is going to come out on May 25th and close on May 28th.

Standard Chartered is going to issue 240 million Indian Depository Receipts (IDR) with every 10 IDRs representing one share of US $ 0.50 nominal value. The prospectus states that the basic EPS for a 50 cent share has been Rs. 78.38 in 2009, so for the IDR, the EPS to be considered would be Rs. 7.83. In 2008 the EPS was Rs. 89.67, and it was Rs. 82.16 in the year before that. Just for reference, I did a quick check on SBI P/E on Bloomberg and saw that it was 12.28. The prospectus itself states the industry composite P/E as 16.77. The price band has not been declared yet, and I will update this post once it is declared.

As is becoming the norm – there is a 5% discount for retail investors and employees on this issue.

Standard Chartered has two business divisions: Consumer banking and Wholesale banking, and here is a brief on what these divisions do from the prospectus:

Consumer Banking products and services include banking services, deposit-taking services, credit cards, personal loans, mortgages, auto finance and wealth management services. Major markets include Hong Kong, Singapore, Malaysia, Indonesia, South Korea, Pakistan, India, Taiwan and the UAE. Principal customers of the Consumer Banking business are individuals in Asia, Africa and the Middle East. In addition to serving individuals, Consumer Banking also offers a range of deposittaking, trade, lending and other banking services to SMEs. As at 31 December 2009, the Group has approximately 1,700 branches and 5679 ATMs operating in more than 71 markets. These are a key part of the distribution network for its Consumer Banking business. Wholesale Banking provides a wide range of solutions to help corporate and institutional clients facilitate trade and finance across some of the important growing markets and trade corridors in today’s global economy.

The Wholesale Banking structure, bringing Corporate and Institutional Banking and Global Markets under one management team, provides customers with an efficient level of service and promotes the cross-selling of products and services to customers through the Group’s emerging market network in Asia, Africa and the Middle East. This is complemented by a sales origination platform in India, the UK, the US, Australia and Japan. Wholesale Banking customers include multinational and large local corporations, banks, other financial institutions and, particularly in Hong Kong, India, the UAE, Singapore and Malaysia, medium-sized local companies.

I will update the post with more details when the pricing is out.

InfoLadies, No Fear, Structured Products and more

Here are a few links for some nice Sunday reading.

The InfoLadies of Bangladesh, Armed with Bicycle and Netbooks @ Gizmodo

Structured Products @ Capital Mind

Fear is a No-No @ A VC

As Mrs Watanabe ages, Japan turns to Mrs Wang and her credit card @ Beyond BRICS

Job versus Vocation – What I didn’t learn in B-School @ HBR

Legislation may end interchange fee and end cap ATM fee @ Cash Money Life

How to lower your homeowners insurance premiums @ The Digerati Life

Mango MasterCard Prepaid Debit Card Review @ The Smarter Wallet

Economy and your Finances Carnival 23rd May 2010

It’s time for another carnival and I hope you enjoy these posts here. Thanks to all who contributed. Enjoy!


Tom Tessin presents 7 Steps to a Lower APR posted at FSC Blog, saying, “Want to get a lower APR on your credit card? If so, here are 7 steps you can take in order to cut it down today!”

debt kid presents Getting Discouraged posted at Debt Kid.

Michael Pruser presents Best Business Credit Cards for Start Ups posted at The Dough Roller.

Silicon Valley Blogger presents What Are The Best Credit Card Rewards Programs? posted at The Digerati Life

Rob presents Bankruptcy Advice posted at Stock Tips, saying, “Bankruptcy advice is crucial to perform the most appropriate steps when filing for bankruptcy.”

BWL presents Best Credit Cards For Cash Back Rewards posted at Christian Personal Finance, saying, “This article looks at some of the best credit cards to have if you are into the cash-back rewards programs…”


Mr. Money Smarts presents Cash For Caulkers Home Improvement Rebate: Money To Retrofit Your Home For Energy Efficiency posted at Smart On Money, saying, “With the economy ailing the Obama administration is working to pass a rebate for folks to buy energy efficient home improvements.”


Consumer Boomer presents How to Get a No Fee IRA with Lending Club posted at Consumer Boomer.

Mike @ Green Panda presents Asset Allocation Basis Part 2: A closer Look at Fixed Income Assets posted at Green Panda Treehouse, saying, “Regardless if you are ready to take risk or not, fixed income should always be considered while managing your asset allocation as a new or experienced investor.”

PT presents A Discussion on Asset Allocation posted at Prime Time Money.

Before You Invest presents Types of Mutual Funds posted at Before You Invest….

Dividend Tree presents Dividend Investing and Businesses with Moat posted at Dividend Tree, saying, “There are many companies that have many years building moats around their businesses. This moat makes it difficult for competitors to encroach upon their market share. Suffice to say, business with moat have sustainable competitive advantage.”

Continue reading “Economy and your Finances Carnival 23rd May 2010”

Fixed deposits interest rates in India

Update: I am no longer updating this page, but you can find some of the best interest rates currently offered in India here.

As I reviewed my bank interest rates in India page to see if it needed to be updated – I saw that I didn’t include a few banks that were paying a pretty decent interest rate on fixed deposits in India.

So, let me show you an updated table of banks and the fixed deposit interest rates they are paying right now. As I went about making this fixed deposit comparison, I realized that a lot of banks pay less than 3.5% on fixed deposits of say 45 days or less. The savings account pays 3.5% so why would anyone make a fixed deposit of anything less than 3.5%?

Am I missing something?

Updated on 10th Jan 2011

Update: Feb 27th 2011

S.No. Bank 1 Year to < 2 years 2 Years to < 3 years 3 Years to < 5 years More than 5
1 Allahabad Bank 8.00% 8.25% 8.25% 8.30%
2 Andhra Bank 9.00% 9.25% 8.00% 8.00%
3 Axis Bank 8.75% 8.25% 7.00% 7.00%
4 Bank of Baroda 8.75% 9.10% 8.75% 8.25%
5 Bank of India 8.75% 9.25% 8.25% 7.00%
6 Bank of Maharashtra 8.30% 9.25% 8.30% 8.00%
7 Canara Bank 8.75% 9.10% 9.25% 8.00%
8 Central Bank of India 8.75% 8.75% 8.80% 8.60%
9 Dena Bank 8.25% 9.00% 8.25% 7.75%
10 HDFC Bank 8.25% 9.00% 8.25% 8.25%
11 ICICI Bank 8.50% 9.25% 9.25% 8.25%
12 IDBI Bank 9.00% 9.25% 8.60% 8.50%
13 Indian Bank 8.50% 9.40% 8.50% 8.00%
14 Indian Overseas Bank % % % %
15 Indus Ind Bank 9.00% 8.75% 8.75% 8.50%
16 J&K Bank 8.50% 8.50% 8.50% 8.25%
17 Karnataka Bank 9.75% 9.50% 9.25% 8.75%
18 Karur Vysya Bank 10.00% 9.75% 9.00% 8.00%
19 Kotak Bank 9.25% 9.40% 9.25% 8.75%
20 PNB % % % 8.50%
21 Punjab and Sind Bank 9.00% 9.25% 9.05% 8.75%
22 South Indian Bank 9.25% 8.75% 8.75% 8.25%
23 State Bank of Hyderabad % 9.25% 8.75% 8.75%
24 State Bank of India 8.25% 9.00% 8.25% 8.50%
25 State Bank of Patiala 8.50% 9.00% 8.25% %
26 State Bank of Travancore 9.25% 9.25% 9.25% 8.75%
27 Syndicate Bank 9.25% 9.25% 9.00% 8.60%
28 UCO Bank 9.00% 8.50% 8.50% 7.75%
29 Union Bank of India 8.50% 8.75% 9.00% 8.00%
30 Vijaya Bank 9.25% 9.25% 8.50% 8.25%

Click on the New Here page to see how you can make the best use of this site.

Update: For some time there used to another fixed deposit interest rates in India page which had a few more banks than given in this list, but now I have included all those here as well.

Click on the New Here page that tells you how to make the best use of this site.

Book Review: The Little Book That Beats The Market by Joel Greenblatt

I read The Little Book That Beats the Market by Joel Greenblatt last Sunday, and liked it quite a bit. The book promises you a magic formula that will give you above average stock market returns over the long run, and quite honestly I do believe that if followed – this formula has the potential to give above average returns in the long run.

Will I be using this formula? – No.

Personally, I have no way of gathering the information on Indian stocks that this formula needs, and even if I had, I still wouldn’t use it because the work involved is a lot for someone like me. The other reason is that I use something similar, it is of course not magical or anything, and I have not made pots of money, but as far as the approach and thought process go – it is similar.

That said, this book is still a great read for anyone who is interested in value investing, and looks at stocks as instruments for long term investments, and not daily trading or punting.

Joel Greenblatt has done a great job of explaining how one should look at stocks, and this little book is very good to shape a foundation on how you should approach investing, and your thought process about it. If you are like me, you would be really skeptical of a book that promises magical formulas and beating the markets, but the content will surprise you. In fact, at one point the author goes to say that some people should not invest directly in stocks at all – how is that coming from a book which teaches you to beat the market?

The writing is clear, easy to read, funny and makes sense. The formula itself is not so difficult to follow and is in fact quite doable. But let me reiterate, if you are buying the book to follow the formula – don’t, because it is unlikely that you will follow it.

You should only buy The Little Book That Beats the Market thinking that it will give you an idea on how to think about stock, value and long term investing, and no magic bullet.

Disclosure: Links are affiliate.

Access Facebook free on your mobile

Facebook announced today that it has collaborated with mobile operators throughout the world to provide access to a new mobile version of Facebook for free. The new site is called 0.facebook.com, and you won’t be charged any data usage charges, if you are with one of their partnering mobile phone operators.

Reliance and Videocon have partnered with them in India.

From the Facebook blog:

It’s free: Thanks to the help of mobile operators we collaborated with, people can access 0.facebook.com without any data charges. Using 0.facebook.com is completely free. People will only pay for data charges when they view photos or when they leave 0.facebook.com to browse other mobile sites. When they click to view a photo or browse another mobile site a notification page will appear to confirm that they will be charged if they want to leave 0.facebook.com

You can go to the blog post announcing this to read details and see other countries and operators that will offer this service.

Clean 404: Tool to fight Link Rot for Bloggers and Webmasters

I know that some of you have blogs of your own, so today I am going to tell you about a new feature that I started using on OneMint, and will be of interest to other bloggers and website owners as well.

Now, I know all you smart readers are wondering why I am telling you about a blog feature now, when I have never done so in the past. That’s because this feature has been developed by my best friend Robin (same guy who helped with the hack attack), and the thing works quite well.

I link to several websites in my posts, especially the carnival posts. Then there are people who leave comments and their names are links back to their own websites, if they chose to do so. Other bloggers and webmasters do the same thing.

Most websites link out to a large number of other web-pages – internal as well as external over a period of time, and some of these links go bad. Geeky types call this link rot. I see some of this in my carnival posts, and bigger blogs with a large number of comments will notice this with external links to the commenter’s blog, especially if the post is older than a year.

When a visitor clicks on a broken link often such a page appears:

Clean 404
Broken Link

The trouble with this is that these are links pointing to other websites and if they are broken, I lose a visitor who could have stayed on my own blog a little longer. And, since its an external page – I have no control on it, and cleaning up after broken links becomes a nuisance.

Clean 404 is an excellent new tool which automatically detects broken links on your website (internal and external), and when someone clicks on such a link, it redirects them to a page which contains search results from your page plus Google and Amazon ads, like the one you see below.

Clean 404
Clean 404 Broken Link Page

The good thing about this is that not only does it show users relevant links, it shows them Google Adsense ads and Amazon affiliate ads as well, and if you use any of these two services, your ads will be shown to the user. The ads will be in the ratio of 60:40 in your favor. 40% of the ad revenue from this source will go to Clean 404.

So, not only will you get a chance to retain visitors despite of link rot, you will get a chance to make a little money as well!

Installing it is very easy, as you just have to include one line of code in your page. You can find details here. When you install it, you will see a Clean 404 icon appearing on your sidebar. There are configurations which allow you to get rid of this, but it impacts the ad ratio.

In summary you get the following benefits:

1. You don’t have to worry about checking which links go bad – Clean 404 does it for you.
2. Clean 404 automatically finds bad links and redirects users to a page which has ads as well as relevant links.
3. User experience is greatly enhanced as they don’t see a broken link any more.
4. You get to keep your visitor and possibly earn some money too.

This tool was launched today, so all you early adopters can take it out for a test ride right-away.

Here are some links with more details:

Learn about Clean 404

Use Clean 404

We will be back to regular programming tomorrow.