MICRO Finance will this Business sustain

Whenever an investor selects or buys a stock one should evaluate if the business model sustainable in next 5-10-15-20years and when you buy a stock a futuristic business model should be in place. We have seen many business model collapse .DOT.COM in 2000 is one good example. Finance has been one best business model for centuries but when political intervention is there it will ruin as we know PSU bank lending before.

Micro Finance as we understand is to take financing @ affordable to masses of the society it would be best suited for non-profit organization and when that is the case profits would be hard to come. I doubt if Micro finance is sustainable model in India which is politically very sensitive and Re.1 Rice+ free Color Television and many more freebie scheme to make poor poorer is realty.

 

Very good article read few comment from politicians who say don’t pay money and article also states this was one reason for U.S Subprime. Lending Money is very bad business and it is done only by rich and they should forego has been mindset for long.

http://online.wsj.com/article/SB10001424052702304316404575580663294846100.html

The micro lending movement that was supposed to help lift millions of people in India out of poverty has in recent weeks fallen into chaos. Urged on by local government officials and politicians, thousands of borrowers have simply stopped paying lenders, even though they have the money. The government has begun ratcheting up restrictions, fearing that borrowers are being buried by usurious interest rates. In some cases, officials have even arrested lending agents for allegedly harassing borrowers.

Local politicians, meanwhile, have blamed dozens of suicides on microlenders and are urging borrowers not to pay back what they owe.

The crisis is in some ways reminiscent of recent debt problems in the U.S. Microfinance is targeted at a population that is overlooked by the mainstream banking industry, the same social niche targeted by payday and subprime lenders in the U.S.
http://akprabhakar.blogspot.com/2010/10/sksmicrofinance-avoid-let-dust-settle.html  SKSMICROFINANCE-Avoid let the dust settle -Avoid –SKSMICROFIN Cmp Rs.1135
The Andhra Pradesh government has appealed to the bankers to extend revolving cash credit to the poor women in a bid to prevent them from seeking loans from microfinance institutions (MFIs). MFIs have been in the news over the recent months allegedly for driving a huge number of their loan-seekers to suicides. Strong arm tactics have led to violence and in an incident yesterday, a girl committed suicide after being beaten by four loan recovery agents who were hunting for her mother. http://www.financialexpress.com/news/women-to-flee-microfinance-institutions/702258/
http://blogs.wsj.com/indiarealtime/2010/10/25/indias-microlenders-still-struggling/ 

India’s microlenders this week are anxious to see whether they will actually be allowed to start distributing and collecting payments for the tiny loans they make to poor borrowers.

India 3rd largest trade deficit-Option danger

News flow in week which are interesting

India is the 3rd largest merchandise trade deficit after the US and the UK, according to data from the WTO’s just-released International Trade Statistics 2010. And BL say India can become 2nd while many countries with trade surplus are worried about currencies, “Some emerging G-20 nations like South Korea, Brazil and Indonesia, which have recently taken action to curb their currencies, have blamed loose U.S. monetary policy for the massive capital inflows for pushing their currencies up. China has even branded it "irresponsible." India strong rupee has started to impact exports, while imports are becoming cheaper. Steel which saw price hike can see price cut as production in china has increased as power rationing eases, Globally also Steel prices have started to soften.

http://www.thehindubusinessline.com/2010/10/22/stories/2010102253260400.htm  India has the world's third largest merchandise trade deficit after the US and the UK, according to data from the World Trade Organization’s just-released International Trade Statistics 2010. The Commerce Ministry has projected India's trade gap to touch $135 billion during 2010-11, though this figure pertains to the fiscal year ended March 31, 2011, whereas the WTO data is based on calendar year. If the $135 billion projection holds for the calendar year as well and there is no change to the UK's $129 billion number – both not wholly unrealistic assumptions – India's trade deficit would end up being next only to the US.

Many use option & futures aggressively to make fast money and range bound in last 10months made many to write options, as I always carry a view that Option is a Ice-cream it will melt once taken out of freezer. Even today of the total open interest position of overall market Rs.1,92,021crs Options alone is Rs.1,17,342crs and bets in Nifty option alone is Rs.1,06,769. Many new timers want to use Option & Futures even without understanding is the biggest worry.

Aditya Birla Money MD quits after bets on Nifty go wrong- firm accepted employee stock options of these officials as margins for these trades. “Fund managers of the scheme bet that the index and stocks would continue to move in a thin band. But the markets surged unexpectedly resulting in these losses,” said a head of a wealth management arm of a private bank. http://economictimes.indiatimes.com/news/news-by-company/corporate-announcement/Aditya-Birla-Money-MD-quits-after-bets-on-Nifty-go-wrong/articleshow/6777543.cms

China hike rate global market corrects shipping rates fall, Steel prices softens and now GDP growth is slowing as per data released by China and this normally impacts global commodity markets.

China c.bank warns of inflation, asset bubble

BEIJING, Oct 21 (Reuters) - Inflation and asset bubble risks could increase sharply in China, and counter-cyclical loan controls are needed as a line of defense, central bank governor Zhou Xiaochuan said in comments published on Thursday. China, which saw its banking system come through the global financial crisis largely unscathed, is grappling with a raft of potential dangers, Zhou said.

INTERVIEW-China needs more rate rises this year -government researcher

BEIJING, Oct 20 (Reuters) - China needs to raise interest rates at least once more this year to ensure that the red-hot property market can be effectively cooled, a government researcher told Reuters. Wang Xiaoguang, a researcher at the Chinese Academy of Governance, an advisory body to the central government, said Tuesday's increase of 25 basis points was not drastic enough to produce the government's desired effect.

6lakh investor exit MF & IIP data

This was most interesting as 6lakh investor exit MF account in month of September alone, but silver lining is the same data shows HDFC has added 41thousand new folio So I am happy Indian investor are taking informed decision. FIIs investing and Indian funds selling both aggressive is really a surprise for retail investor. India is one emerging market where there is no capital restriction while other countries have imposed bigger restrictions due to currency appreciation.

http://www.thehindubusinessline.com/2010/10/12/stories/2010101253370100.htm  The mutual fund industry suffered a 5.8 lakh reduction in folios this September as investors closed accounts to book profits in a buoyant market.

View-IIP data drops to 15months low mainly on account of Capital Goods which registered 72% growth in the month of July has turned negative, contracting by 2.6% in August year-on-year, compared with 9.2% growth in August last year. I don’t know how the data can be so erratic but already http://tinyurl.com/25h3zfd few data have been question by analyst and even by RBI, as erratic data would make it difficult to frame policy. Capital Goods stocks have already turned Negative with BEL-BHEL-BEML-BRGENEGRY-LT-JYTOHISTRUCTURE-PRAJIND seeing selling pressure.

http://www.thehindubusinessline.com/2010/10/13/stories/2010101353420100.htm  Industrial growth drops to 15-month low of 5.6% in August.

Good monsoon rains and higher estimates of crop acreage will help agricultural production grow by 7.2% in 2010-11, after recording a 6.6% decline in the drought-hit previous financial year, according to CMIE, CMIE also pegged the GDP growth at 9.2% in 2010-11 on the back of sustained robust growth in manufacturing and services sectors. Already Fertilizer stocks are on move and other allied industries could also perform GSFC, UNIPHOS, INSECTICIDES, TATACHEM, NFL are still looking good

http://akprabhakar.blogspot.com/2010/10/sksmicrofinance-avoid-let-dust-settle.html  This newly listed stock which has traded just 44trading days has been in news in last few weeks for all negative reason.

Revised lots for F&O, NMDC is positive stock after coming into F&O

SEBI has advised exchange to standardize lot size for derivative contracts on individual securities once in every 6 months as per circular no. SEBI/DNPD/Cir- 50/2010 dated January 8, 2010. In pursuance to the revised methodology mentioned in the SEBI circular, it is proposed to carry out revision of market lot for derivatives contracts as follows (Download Circular attachment): http://www.4shared.com/document/Pzp4hYdC/Revision_of_Market_Lot.html

NMDC has been brought into F&O Segment which can be positive for the stock in short-term, stock can return 7-9% soon.

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