Wednesday, July 13, 2016

Sebi's Swachata Abhiyan

Sebi's Swachata Abhiyan
SEBI plans to delist more than 4,000 listed companies whose shares aren’t actively traded, as it tightens supervision of Asia’s fourth-largest stock market.
The clean up includes 1,200 companies whose shares have been suspended from trading on the BSE Ltd. and the National Stock Exchange of India Ltd. for the past seven years, U.K. Sinha, chairman of the Securities & Exchange Board of India, said in Mumbai. The 3,000 companies listed on the defunct regional bourses would also face the axe, he said.
“Having a large number of listed companies is a source of nuisance,” Sinha said. “They were being used to manipulate markets and avoid taxes. Cleaning up is a focus area this year.”
SEBI, in a bid to weed out illiquid stocks, in January allowed owners of small companies, where trading had been less than 10 percent of the total shares in the previous 12 months, to take them private. While more than 5,400 companies are listed on the BSE, the top 500 make up 95 percent of the total market value, according to the exchange’s website.
Founders of the companies marked for delisting will be required to make exit offers to shareholders, while those willing to resume trading on the BSE and NSE would be allowed after meeting regulatory requirements, Sinha said. Those who don’t comply “will face the music,” he said.
“Sebi is a substantially empowered regulator and law allows us to take action against them,” Sinha said.
(🚫 *So* sell the *shares in illiquid* shares *before it is delisted* 🚫 .)
*Big warning* for all before the action starts *confirm the above at your end too, this would *save your capital* n get in thousands or lacs in your accounts immediately for deployment somewhere else.

Beware of Fraudsters

*These 8 Signs Can Tell You If A Stock Is Doomed -*

*These 8 Signs Can Tell You If A Stock Is Doomed -*
Picking the right stocks in the market to invest in is not an easy task, and your success in picking the right ones is not always guaranteed.
Be that as it may, these eight signs can help you determine if a stock is getting set to crash.
1. If the company has a negative cash flow.
Cash flow is a company’s lifeline. When a company’s cash payments are bigger than its receipts, it means the company has a negative cash flow that can eventually lead to insolvency.
2. High Debt to Equity Ratio
A debt-to-equity ratio measures a company’s bankruptcy risk by comparing its long- and short-term debts to its shareholders’ equity. A high ratio usually means the company has been aggressive in financing its growth with debt. Eventually, this debt can become too much to handle.
3. Interest coverage ratio
The interest coverage ratio reveals if a company is having difficulty paying its debt. If a company’s ratio is below 1, it can’t meet its debt obligations with the period’s earnings before interest and tax.
4. The usual share price decline
The fourth sign is a decline in share prices. A sustained decline almost always precedes a corporate collapse. As an example set in the US, Enron’s stock started falling 16 months before it went bust. But also, a declining stock can signal a buying opportunity. Consider the next four signs to distinguish between a collapse and an opportunity.
5. Listen to profit warnings
Profit warnings should be taken very seriously. Growing evidence suggests markets under-react to bad news. Don’t forget to always listen to analyst calls, as you can glean very useful information from the questions being asked by analysts who cover the stock.
6. Watch out for stock market activity of the company owners, directors or executives
Companies must divulge insider trading, as in the purchase and sales of shares owned by substantial shareholders or directors. They have the most current intel, so heavy selling or buying can be a sign.
7. Sudden exit of key staff of the company
The sudden resignation of key executives or directors can also be a bad sign. Companies may sack a key executive as a sign that the company has had a terrible misstep and is making management changes as atonement, or as a sign of realization that management has been under-performing.
8. Investigations by regulatory bodies
Finally, formal investigations by regulators such as SEC, frequently precedes a collapse. Companies may dabble into wrongdoing in order to stay afloat when they get into financial distress. When the company is being investigated, it is very likely that they have been caught in the process, and will pay for their crimes. And the shareholders will ultimately suffer for it.

Sunday, June 26, 2016

Brexit and after effects

ब्रिटनमध्ये होत असलेल्या जनमत चाचणीचा परिणाम जगभरातील शेअर बाजारावर झाला आहे. कारण मुंबई शेअर बाजार उघडताच, सेन्सेक्स तब्बल 900 अंकांनी  गडगडला आहे.
सेन्सेक्स काल 27002 अंकांवर बंद झाला होता, आज उघडताच तो 26367 अंकांवर जाऊन पोहोचला. दुसरीकडे पौंडनेही 31 वर्षातील निच्चांक गाठला, डॉलरच्या तुलनेत 9 टक्क्यांनी घसरला.
ब्रिटनने युरोपियन युनियनमध्ये राहावं की नाही, यासाठी तिथल्या नागरिंकांनी काल मतदान केलं आहे. या जनमत चाचणीचा निकाल  आज आहे. हा निकाल जगाच्या राजकारण आणि अर्थकारणावर दूरगामी परिणाम करणारा ठरू शकतो.
युरोपियन युनियनमध्ये रहावं, की नाही यावर ब्रिटनमध्ये खल सुरू आहे. ही लढाई इतकी पेटली आहे, की त्यात मजूर पक्षाच्या खासदार जोआना कॉक्स यांचा जीव गेला. त्या धक्क्यातून सावरून ब्रिटनच्या नागरिकांना आपलं भवितव्य ठरवायचं आहे.
*काय आहे युरोपियन युनियन?*
28 देश आणि 50 कोटी लोकसंख्येच्या युरोपियन युनियनची अर्थव्यवस्था 16 खर्व डॉलर्सची असून तिचा जागतिक डरडोई उत्पन्नातला वाटा एक चतुर्थांश इतका आहे.
युरोपियन युनियनमधील नागरीक सदस्य देशात व्हिसाशिवाय मुक्तपणे प्रवास, व्यापार, नोकरी करू शकतात आणि तिथं युरो हे एकच चलन वापरलं जातं.
1973 मध्ये ब्रिटननं या संघटनेचं सदस्यत्व स्वीकारलं.
पण बदललेल्या आर्थिक परिस्थितीत, खास करून निर्वासितांचे लोंढे वाढल्यावर युरोपियन युनियनमधून वेगळं होण्याच्या मागणीनं ब्रिटनमध्ये जोर धरला आहे. ब्रिटनने युरोपियन युनियनमधून बाहेर पडण्याचा म्हणजे ब्रेक्झिटचा निर्णय घेतला, तर त्याचे पडसाद जगभर उमटतील.

*ब्रिक्झिटचे भारतावर होणारे परिणाम*
युरोपियन युनियन ही भारतासाठी सर्वात मोठी बाजारपेठ आहे. भारतीय कंपन्यांसाठी ब्रिटन हे युरोपचं प्रवेशद्वार बनलं आहे.
जवळपास 800 हून अधिक भारतीय कंपन्यांची ब्रिटनमध्ये गुंतवणूक असून, त्यात आयटी, स्टील आणि ऑटोमोबाईल कंपन्यांचा वाटा मोठा आहे. आयटी क्षेत्रातील भारतीय कंपन्यांची 6 ते 18 टक्के कमाई ब्रिटनमधून होते.
ब्रिटन युरोपियन युनियनमधून बाहेर पडल्यास या सर्व कंपन्यांना युरोपातील इतर देशांशी नव्यानं करार करावे लागतील. त्यामुळं खर्चात वाढ तर होईलच, शिवाय वेगवेगळ्या देशांत वेगळवेगळ्या कायद्यांनुसार काम करावं लागेल.
ब्रेक्झिटमुळे युरो आणि पाऊंड या चलनांमध्ये स्पर्धा सुरू होऊन त्यात डॉलरचा भाव वधारू शकतो. अशा परिस्थितीत रुपयाचं मूल्य घसरल्यानं कच्चं तेल, सोनं, इलेक्ट्रॉनिक वस्तूंच्या आयातीला मोठा फटका बसेल. पेट्रोल-डिझेलच्या किंमती वाढल्यानं पर्यायानं भारतात महागाई आणखी वाढेल. तर जगभरातील शेअर बाजारांवरही परिणाम होईल.
युरोपियन युनियनमधून वेगळं झाल्यास ब्रिटनचा पैसा वाचेल, पण जवळपास दहा लाख ब्रिटिश नागरिकांना नोकरी गमवावी लागू शकते.
हे सारं काही एका झटक्यात होणार नाही, तर त्यासाठी दोन वर्षांचा कालवधी लागेल. पण निकाल काहीही लागला, तरी ही जनमत चाचणी युरोपचं आणि जगाचंही भवितव्य निश्चित करू शकते.

Friday, June 17, 2016

15 things that you should know about the Model GST Law

📌*15 things you should know about Model GST Law*
On June 14, 2016 the Finance Ministry has released the *'Model GST Law'*. It outlines the structure of the GST regime. Further, the draft of 'Integrated GST Bill, 2016' is also released along with such Model GST laws.
It also provides the framework for levy and collection of CGST and SGST. "CGST" is the tax levied under the Central Goods and Services Tax Bill, 2016. "IGST" is the tax levied under the Integrated Goods and Services Tax Bill, 2016.

*Key takeaways from Model GST law are given hereunder:*

*1) Threshold limit for registration*
The dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakhs. However, dealers conducting business in any North Eastern State are required to take registration if their turnover exceeds Rs.4 lakhs.
*2) Place of registration*
The dealer has to take registration in the State from where taxable goods or services are supplied.
*3) Migration of existing taxpayers to GST*
Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of 6 months. Such person will have to furnish the requisite information within 6 months and on furnishing of such information, final registration certificate shall be granted by the Central/State Government.
*4) GST compliance rating score*
Every taxable person shall be assigned a GST compliance rating score based on his record of compliance with the provisions of this Act. The GST compliance rating score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain.
*5) Levy of Tax*
The person registered under this law is liable to pay tax if his aggregate turnover in a financial year exceeds Rs 10 lakhs. However, a dealer conducting business in any of the North Eastern is required to pay tax if his aggregate turnover exceeds Rs. 5 lakhs.
A negative list has also been prescribed for transactions and activities of Government and Local Authorities which shall be exempt from GST levy, like activities of issuance of passport, visa, driving license, birth certificate or death certificate, etc.
*6) Taxable Event*
The taxable event under GST regime will be supply of goods or services. Supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration. It also includes importation of service, whether or not for a consideration.
*7) Point of taxation*
CGST/SGST shall be payable at the earliest of the following dates, namely:
  (i) Date on which the goods are removed for supply to the recipient (in case of movable goods).
 (ii) Date on which the goods are made available to the recipient (in case of immovable goods).
(iii) Date of issuing invoice by supplier; or
(iv) Date of receipt of payment by supplier; or
 (v) Date on which recipient shows the receipt of the goods in his books of account.
*8) TCS on online sales of goods or service*
Every E-commerce operator engaged in facilitating the supply of any goods and/or services (like Amazon, Flipkart, etc.) shall collect tax at source at the time of credit or at the time of payment whichever is earlier.
*9) Valuation Rules*
Such Rules shall apply to the supply of goods and/or services under the IGST/CGST/SGST Bill. Some of the methods prescribed for valuation are given hereunder:
  a) Transaction Value: As per this method the value of goods and/or services shall be the transaction value.
  b) Transaction value of goods or services of like kind: Where value of supply cannot be determined under previous method [i.e. point a], the value shall be determined on the basis of transaction value of goods and/or services of like kind and quality supplied at or about the same time to customers.
  c) Computed Value Method: Where value cannot be determined under previous method [i.e., point b], it shall be based on computed value which shall include cost of production, manufacture or processing of the goods or, the cost of the provision of services, the charges, if any, for design and brand and amount towards profit and general expenses.
  d) Residual Method: Where the value cannot be determined under the computed value method, the value shall be determined using reasonable means consistent with the principles and general provisions of these Rules.
*10) Utilization of credit:*
Utilization of IGST: The amount of input tax credit on account of IGST available in the electronic credit ledger of dealer shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.
Utilization of SGST: The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST.
Utilization of CGST: The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST.
*Note*: The input tax credit on account of CGST shall not be available for payment of SGST.
*11) Payment*
Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using credit/debit cards or NEFT or RTGS. This amount shall be credited to the electronic cash ledger of dealer.
*12) TDS*
The Central or a State Government may mandate certain departments (viz, local authority, Govt. agencies) to deduct tax at the rate of one percent on notified goods or services, where the total value of such supply, under a contract, exceeds Rs 10 lakhs.
*13) Refund*
A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/SGST. The application can be made before the expiry of two years from the relevant date as may be prescribed. It has been provided that the limitation of two years shall not apply where such tax or interest or the amount has been paid under protest.
*14) Returns*
Dealers shall be required to furnish following returns
  a) Monthly Return: Every registered taxable person shall have to e-file a monthly return for inward and outward supplies of goods and/or services, input tax credit availed, tax payable, tax paid and other particulars within 20 days after the end of such month.
  b) Return for Composition Scheme: Dealers paying tax under composition scheme shall have to furnish a return for each quarter or part thereof, electronically within 18 days after the end of such quarter.
  c) TDS Return: Every dealer who is required to deduct tax at source shall furnish a return electronically within 10 days after the end of month in which deduction is made.
  d) Return for Input Service Distributor: Every Input Service Distributor shall file e-return for every calendar month or part thereof, within 13 days after the end of such month.
  e) First Return: Every registered taxable person paying CGST/SGST on all intra-State supplies of goods and/or services shall have to furnish the first return from the date on which he became liable to registration till the end of the month in which the registration has been granted.
  f) Annual return: Every registered taxable person shall have to furnish an annual return for every financial year electronically on or before the 31st day of December following the end of such financial year.
  g) Final return: Every registered taxable person who applies for cancellation of registration shall have to furnish a final return within three months of the date of cancellation or date of cancellation order, whichever is later, in a prescribed form.
*15) Transitional Provisions*
  a. Under the Model GST Law, a registered taxable person will be entitled to take credit of the amount of cenvat credit/ Value Added Tax carried forward in a return furnished by him in respect of the period ending with the day immediately preceeding the appointed day.
  b. As per Model GST Law, a registered taxable person shall be entitled to take in his electronic credit ledger/credit of the unavailed cenvat credit/ unavailed input tax credit in respect of capital goods not carried forward in a return furnished by him for the period ending with the day immediately preceding the appointed day.
  c. If a person registered under GST was not liable to be registered under the earlier law or if he was manufacturing exempted goods under the earlier law which are not taxable, then he will be allowed to take credit of eligible duties and taxes in respect of inputs held in stocks or semi-finished/finished goods.
  d. Every claim for refund of any duty/tax and interest, if any, paid on such duty/tax or any other amount, filed by any person before the appointed day, shall be disposed of in accordance with the provisions of earlier law and any amount eventually accruing to him shall be paid in cash. However, where any claim for refund is fully or partially rejected, the amount so rejected shall lapse.

Monday, June 6, 2016

Finance Act changes applicable w.e.f. June 1, 2016

🌲Finance Act Changes applicable from *1/6/16*
🌴Changes Effective from _June, 2016_
👉Electronic Hearing under Income Tax law enabled
👉Document required to be issued by an Income Tax Authority can be issued in paper form or communicated in electronic form
👉Equalization Levy @ 6% on _online digital advertisement and incidental services_ or provision of digital advertising space
👉TCS @ 1% on luxury vehicles and cash sale of goods or provision of services
👉Exit Tax for Charitable Institutions
👉Non resident not having PAN shall not be subjected to 20% TDS
👉Jurisdiction of Assessing Officer not to questioned in serach cases after one month from notice u/s 153A
👉Non Corporate assessee also to pay advance tax , _15% by 15th June . 45% by 15th Sep, 75% by 15th Dec and 100% by 15th March_
_👉In case of presumptive Income 100% advance tax to be paid by 15th March_
👉Application for Waiver of Interest u/s 220(2A) to be disposed off with in one year
👉Interest under section 234C shall not be chargeable in case of an assessee having income under the head “Profits and gains of business or profession” for the first time,
_👉 Interest on Refund for timely filed return to be allowed from 1st April but interest on refund for belated return to be allowed from date of furnishing of return_
_👉 Interest on refund of self assessment tax to be allowed from date of filing of return or payment of tax, whichever is later._
_👉No Interest to be allowed if refund is lesser than 10% of determined tax_
👉Additional 3% Interest for Appeal Effect delayed beyond 3 months
👉In ITAT post of Sr Vice President abolished
👉Rectification period of ITAT orders limited from 4 years to 6 months
👉Monetary limit for Hearing of appeal by SMC in ITAT raised from 15 lacs to 50 lacs u/s 255(3)
👉Time Limit for completion of assessments reduced from 24 months to 21 months . Assessments to be complted by 31st December.
👉Order for appeal effect to be passed with in 3 months from the end of month in which appeal order is received
👉Limit of Rs. 5000/- for Winnings from Horse Races enhanced to Rs. 10,000/-
_👉For TDS on payment to Contractors Aggregate Annual Limit of Rs. 75000/- increased to Rs 100000/-_
👉Monetary Limit of Rs. 20,000/- for TDS on Insurance Commission u/s 194D reduced to Rs. 15000
_👉Monetary Limit for TDS on Commission u/s 194H enhanced from Rs. 5000/- to Rs. 15000/- and rate reduced from 10% to 5% to bring parity with Insurance Commission._
👉Monetary Limit for TDS on Commission on Lottery Tickets u/s 194G enhanced from Rs. 1000/- to Rs. 15000/- and rate reduced from 10% to 5% to bring parity with Insurance and other Commission
👉TDS rate on withdrawl of NSS Deposits reduced from 20% to 10% u/s 194EE
👉TDS on LIC Maturities exceeding Rs. 1,00,000/- not exempt u/s 10(10D) was charged @2% by Finance Act 2014 wef 01-10-2014 . TDS rate lowered to 1%.
👉TDS @10% for compulsory acquisition of immovable property other than agriculture land where aggregate payments during financial year exceed Rs. 2 lacs now enhanced to Rs 2.50 lacs.
_👉Form 15G/15H enabled for rental payments also_
👉The Direct Tax Dispute Resolution Scheme for immunity from post assessment interest, penalty and prosecution for cases pending before CITA on 29-02-2016 [Scheme Available up to 31st December]
👉The Income Declaration Scheme 2016. Tax, Surcharge and Penalty @ 45% of Undisclosed Income. Declaration to be filed till 30th September. Tax etc to be paid till 30th November.

Monday, May 30, 2016

Rakesh Jhunjhunwala and Radhakishan Damani

Jhunjhunwala grew up in Mumbai, India where his father is posted as an Income Tax Officer. He graduated from Sydenham College and thereafter enrolled at the Institute of Chartered Accountants of India.
Jhunjhunwala is the chairman of Aptech Limited and Hungama Digital Media Entertainment Pvt. Ltd. and sits on the board of directors of various Indian companies such as Prime Focus Limited, Geojit BNP Paribas Financial Services Limited, Bilcare Limited, Praj Industries Limited, Provogue India Limited, Concord Biotech Limited, Innovasynth Technologies (I) Limited, Mid Day Multimedia Limited, Nagarjuna Construction Company Limited, Viceroy Hotels Limited and Tops Security Limited.
Rakesh Jhunjhunwala Success Story from 5k to 1.8$ Billion
Rakesh Jhunjhunwala, the name that needs no introduction. The legendary investor who is known as the Warren Buffet of India. Lets check out the success story of Rakesh Jhunjhunwala and his journey from 5000 Rs to 8000 Crore.
Rakesh Jhunjhunwala was born on 5th July 1960. He father was an Income tax officer. His father was interested in stocks and used to discuss about the stock market with his friends. Rakesh as a child would listen to them. Once he asked his father why the price fluctuate. He told him to check the news, it makes the price to fluctuates. This was his first lesson of stocks market. He got fascinated by stocks and found it interesting. He expressed his wish to get into stock market to his father. He told him to do whatever he wanted in life but at least get professionally qualified. Rakesh then took up chartered accountancy and completed his CA in 1985.
After completing the CA he told his father that he wanted to go in the stock market. His father reacted by telling not to ask him or any of his friends for money. Earn and trade with your money. He started his career in 1985 when the BSE Sensex was at 150. He made his first big profit of Rs 0.5 million in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 which he had purchased for Rs 43 a share just 3 months prior. . Between 1986 and 1989 he earned Rs 20–2.5 million. His first major successful bet was iron mining company Sesa Goa(now Sesa Sterlite). He bought 400,000 shares of Sesa Goa in forward trading, worth Rs 10 million and sold about 2-250,000 shares at Rs 60–65 and another 100,000 at Rs 150–175. The price rose to Rs 2200 and he sold some shares.
Jhunjhunwala bought 6 crore shares of Titan in 2002-03 at an average price of around Rs 3. The stock is currently trading at 390 Rs level and his investment value is now 2100 crore, which made around 35 lakh per hour for him. In 2006 he bought lupin around 150 Rs which is now trading at 1100 levels. He bought crisil around 200-300 levels which is now at 1800. Likewise there are so many stocks in his portfolio that made huge money for him.
His philosophy
Rakesh Jhunjhunwala believes in power of mistakes. He says its the mistakes that made him to learn and become a better investor. he says. “If you don’t believe the markets are supreme, you will never admit that it was your mistake. If you don’t admit that it is your mistake, you will never learn. To succeed in the stock market, not only is the ability to learn from one’s mistakes vital, he says, but also to blame only oneself for it. “I don’t blame the promoters of companies. I blame myself. The promoter is what he is. I have to recognise that. He is not what I expect him to be.” Jhunjhunwala says what he has learnt in life is to try and earn money in trading and to invest it in stocks.
His believe on India
Jhunjhunwala says he is bullish on the country growth since he entered the stock market. He insists the Indian economy will grow by 9-10 percent, though that may need a transition of two to three years. Jhunjhunwala’s thesis is that Indians will save $1 trillion a year, and even if 10 percent of that money—$100 billion —flows into the markets, there will be a tsunami on the bourses. “So I remain bullish that, for the next 20 years, we could see a bull run like the one Wall Street had from 1987.”

His daily routine
He wakes up at 7.30 and does some exercise. At 9 am he watches TV to get update about market opening. At 10 he gets ready for work after having breakfast. Around 11.30 he reaches his office talks to his people, checks mails, reads articles and watch the trading screen. 4 PM onwards he meets the people at the end of the trading hours. At 7.30 he leaves for home, after reaching home he plays with his children and looks into his daughters homework. At 9.30 he takes dinner and after 10 goes to bed.
Radhakishan damani
He is a low-profile stock market veteran who invests on his own account. His portfolio includes a string of blue-chip stocks that he has been accumulating over the years. Notable holding is a 26 percent stake in cigarette maker VST Industries, an affiliate of British American Tobacco. A big chunk of his wealth also comes from hypermarket chain D-Mart, which he set up and grew into a chain of more than 70 outlets, mostly in western India. He has pledged $8 million to a Bangalore institute and $1.8 million to the new Ashoka University.
Fast Fact: His close friend is fellow investor Rakesh Jhunjhunwala (ranked 51) who refers to Damani as his 'guru'.
Mr Damani started his career as a trader in ball bearings, far from the battlefield of bulls and bears. Following his father’s death, he shut shop and joined his brother’s stock broking business, inherited from their father. Just 32 and lacking knowledge of market dynamics, Mr Damani’s only asset was his keenness to learn.
“He was not a value investor to begin with; he began his career in the stock market as a speculator,” says a Damani watcher. Mr Damani was quick to realise speculation was the not the best way to grow capital. Inspired by the legendary value investor Chandrakant Sampat, he started playing for the long term.
Often, his strategy was simple. When he bet on Indian Shaving Products (now Gillette), his reasoning was, “People will shave no matter what.” It took Mr Damani some time to gain a foothold, and several of his initial bets flopped. But he steadfastly refused to follow the herd, and concentrated on evolving trading strategies of his own.
Gradually, he began getting his calls right, and within the next couple of years he had joined the ranks of the big boys on Dalal Street. “Few players possess the kind of patience he does. But when he is convinced about any stock, he would buy his desired quantity in one sweep. And if he felt that a stock had run its course, he would dump his holdings at one go,” says an associate.
Also noted was his promptness in cutting losses. “Unlike many other players, ego would never get in the way of his booking losses,” says the associate. Mr Damani himself once said, “Cutting your losses is like performing a surgery on one arm with the other; painful, but it has to be done, otherwise the arm may have to be amputated.”
Mr Damani likes to keep a low profile. “He is not very articulate and does not communicate much, but he is a great listener. He patiently hears out everybody and never scoffs at any idea. It is a different matter that at the end of it all, he would back his judgement and instinct,” says the associate.
All along, Mr Damani made some great calls both on the long and short sides of the market. Yet, many players viewed him as a bear rather than a bull. “In India, anybody who is skilled at short selling is frowned upon, the general perception being that short sellers destroy value,” says a close friend of Mr Damani.
His limited circle of friends is said to include Dalal Street’s latest cult figure Rakesh Jhunjhunwala. Often, the market believed they hunted as a pair. Even if one of them was active at a counter, broking circles would say the duo was in it.
A string of successes notwithstanding, it was the epic battle of 1992, in which he emerged victorious, that would mark Mr Damani as a stock market legend. It was the battle with the Big Bull, Harshad Mehta.
Reining in the Big Bull
The flashy Harshad Mehta shot into prominence thanks to a daring rally that lasted the better part of 1991, only to eventually fizzle out in April 1992. Mr Damani, on his part, was bullish on the market only till February 1992. Even as the Big Bull was pumping up the shares, Mr Damani began to go short.
He reasoned blue chips had already run up a lot and fundamentals no longer justified the rally. What Mr Damani had not bargained for was the seemingly limitless supply of funds to Harshad Mehta. The market kept rising, but rather than cutting his losses, Mr Damani rode on his conviction and doubled up his short positions. “The market took off vertically between February to April, and RK was trapped badly,” recalls a veteran broker. “His losses were huge, and if the rally continued for a few more weeks, he may even have had to shut shop.”
But then, it emerged that Harshad had been siphoning off funds from the banking system and using them to buy stocks. When the scam got exposed, the market went into a tailspin. Mr Damani not only regained the lost ground, but walked away with a tidy profit.
Harshad Mehta was to lock horns with Mr Damani once more in 1998, but this time with fatal consequences for the Big Bull. Harshad now focused on three stocks, BPL, Videocon Industries and Sterlite. The prices of these shares touched dizzy levels even as the broader market fell. It was as though Harshad’s picks were defying gravity.
All the time, Mr Damani was biding his time on the sidelines. A disciple of the old school of investing, his assessment was that the stock price had run far beyond fundamentals. At the time he thought was right, he started building short positions.
Prices continued to climb and he had to square off some initial positions at a loss. But soon, signals came that the Big Bull was having trouble financing his positions. And Mr Damani moved in for the kill. He simply doubled his short positions, under the weight of which, the market caved in.
Panic set in. The prices of the three chosen stocks plunged 60%. Some brokers say exchange authorities even tried to bring together Mr Damani and Harshad for a compromise but the talks failed. “It would be wrong to say that RK’s call was motivated by a desire for revenge,” says a market watcher who once worked with Mr Damani.
“It was all about the price… He would have short sold those stocks irrespective of whoever had a bullish view on them,” he says.
When Mr Damani came to know that some small shareholders were left with positions they could not exit, he covered up a part of short positions by buying shares from these investors at a negotiated price. This was not the first time he had done such a thing. In the early 90s, Mr Damani had accumulated a pile of ACC shares.
When a payment crisis loomed, Mr Damani responded to a request from authorities and offloaded a part of his holding at a discount. He was among those probed by regulators for suspected price hammering, but was eventually given a clean chit.
Towards the fag end of 1998, the overall market sentiment began to improve. Before long, the market was in the grip of a bull run led by technology stocks, which would peak out in February 2000. RK continued to trade, but those close to him say he had already begun scaling down the number and size of his bets.
Was he preparing for a self-imposed exile from the market beginning somewhere in 2001 for the next few years? Friends say he was always passionate about retailing, but were there other factors also that influenced Mr Damani to retreat from Dalal Street?
After the stock market crash of 2001, bear operators were once again under the regulatory scanner, the allegation being that they had colluded to hammer stock prices. Needless to say, Mr Damani also figured on the list of suspects. “Like any other operator, RK made most of his money being on the long side of the market,” says a broker who knows Mr Damani for long.
“He had a finger on the pulse of the market and would not hesitate to sell short if the situation called for it. Unfortunately, his short (selling) calls attracted more attention than some of his long (buying) calls,” he says.
Some players say that Mr Damani found himself a bit out of depth during the technology boom of 1999-2000. He stuck to the classic rules of trading, short selling shares that he felt were over valued and going long on the under valued ones.
But stocks from the sectors that he had an sound understanding of, cement, automobile, steel, were out of favour. Technology was the buzzword at the bourse, and irrespective of whether those companies were making money or not, investors were falling over each other to buy into them.
And Ketan Parekh had now taken over the as the reigning Big Bull, and carved out a reputation for himself as a champion of new economy stocks. Mr Damani’s old school strategies did not work well for him in this period.
The comeback
If anyone had not noticed, Mr Damani’s right calls on Tata Steel and State bank of India made them aware of his return to the stock market this year. But this time, it has been a mixed bag of hits and misses, those close to him say. “Over the last one month, he has been as successful or unsuccessful as other players in his league,” says a Damani watcher.
It may be premature to judge the old fox when the markets have not shown a clear trend. India, like other equity markets around the world, has been volatile over the last month as a result of the crisis involving sub-prime loans in the US. It is anybody’s guess how things will go from here.
The market has also undergone a sea change during Mr Damani’s absence. The number of participants, stocks and liquidity have risen manifold. If there is greater transparency, there is also more volatility to contend with. Admirers or critics, everyone is impatient to know whether and how Mr Damani is going to pull it off this time.