TCS disappoints ....

TCS dropped nearly eleven percent on Tuesday, the highest loss in terms of percentage since it began trading. Disappointing fourth quarter results lead to this.

Financial results can be found here. The profits dropped six percent on a quarter on quarter basis. Profits showed a small increase of four percent on a yearly basis.

TCS earns more than fifty percent of its revenue from North American clients, difficult conditions and an appreciating rupee puts a strain on the margins. TCS still earns more than 44 percent of its revenue from services provided to the Banking and the Financial Industry.

TCS lead a crash of the technology stocks on the BSE sensex with the BSE IT index losing 4 percent; the broader markets posted a gain of a mere 44 points. Infy dropped more than 2.5 percent, HCL systems lost 4.5 percent, Wipro lost more than 4 percent, Tech Mahindra lost more than 4 percent. I own at least a few stocks of each of these companies. After the Infy results, my portfolio suddenly started to look a lot better after the IT stocks started to pick up. Now they have again gone southwards.

MasterCard inControl and Healthcare Industry

Technorati Tags: Healthcare,US

Mastercard is planning to introduce a corporate card through which employers can set a limit on expenditures as well set up locations where the card can be used (Check the Businessweek story here ).

This incontrol Card represents a great opportunity for Healthcare Insurance companies that provide it's members with Cards to be used at Pharmacies(Humana provides a card for its Spending Account Members). In the current scenario, if the member misuses the card and uses to refuel his car or something other than what he qualifies. The Insurance company needs to reject this swipe or adjust in future claims for the member.

With the Mastercard inControl, the Insurance provider can program where the card can be used and for what it can used for. This can result in significant savings by saving all the effort that is required once a bad purchase has been made.

Spotting the next Orchid chemicals ...

Orchid chemicals is stock that had fallen from its peak of 300 to a low of 110 about a fortnight ago. But the stock has seen amazing recovery and gained something like 23 percent  on Monday and has reached a price of 223. If you had invested in this stock 15 days earlier you could have made a profit of hundred percent.

Orchid chemicals lost a whopping 44 percent of its value on the day of when Bear Sterns was sold to JP Morgan for $2 a share. Bear Sterns sold nearly all its assets in the Indian market and sold its stake in Orchid chemicals completely and this lead to margins calls for two firms Indiabulls and Religare securities. A nice article here on what happened during that day.

The company is still based on solid fundamentals and had reported  91%increase in the net profit in Q3 December 2007 over Q3 December 2006. It reported a sales growth of nearly 40% in the same period. Stakes sold in the market by Bear Sterns have been picked up by other Investment banks like Credit Suisse and with Ranbaxy picking up a 9.4 percent stake in the company, Its price has sky rocketed with a 23 percent increase yesterday. And as I am writing this down,  its already up another ten percent in today's trading.

Its much easier to write about such recoveries once they have happened, the trick lies in spotting such stocks that can have a V shaped recovery. So what do you think would be the next Orchid chemicals ???

Technorati Tags: Orchid Chemicals,India,Stocks

What if the Government doesn't intervene now...

There seems to be a debate whether the government should intervene and rescue the homeowners and lenders alike. What happens incase the government or the Federal Reserve doesn't intervene. Many think that if the Government doesn't do anything now, home prices will find a equilibrium based on fundamentals rather than what has pushed up prices over the last few years. Home prices might very well fall below the whatever the fundamental price needs to be, same way the prices did over shoot on their way up. When no one knows what the bottom is going to be, lenders wont be ready to lend at what they think are over priced houses. Buyers even if they want to will not be able to buy if there is no money to borrow. This in turn will push the prices down. Falling prices will deter new home buyers from buying since they would be waiting for the prices to fall still further.

Even if there are moral issues in helping the homeowners and the lenders who got us into this mess, Government and the Federal Reserve need to act to stop the financial industry from collapsing.

US Home Loans vs. Indian Home Loans

Swaminathan S Anklesaria Aiyar in The Sunday Times has written a great article by reasoning why a Subprime mess is not likely to take place in India. Is this definitely an eye opener.

Read the article here.

Also, I feel he’s a great writer and some of his earlier articles are also gems. So please find the list of other articles here.

Here’s a small excerpt.

A housing boom-and-bust has engulfed the US financial sector in crisis. India, too, has experienced a runaway real estate boom, which in a few areas is going bust. The share prices of real estate companies have crashed. Yet, India has no mortgage crisis or financial sector crisis.

Why not? Mainly because of the huge amount of black money in Indian real estate. This has saved the Indian financial sector in unexpected ways. Traditionally, US mortgage lenders checked the creditworthiness of borrowers, and then made the borrower pay at least 20% of the house value, loaning the remaining 80%. So, even if the price of the house dipped, it would still be higher than the bank's loan, and the borrower had an incentive to repay it.

Also if I may add, buying a house in India involves a lot of sentimental factors associated with it. The strong family ties, concept of a joint family or living with your parents also serve as a deterrent to just switching houses or walking away from one. While the amount of black (illegal) money in circulation in India is certainly not advocated it’s an interesting outlook into how the home loan market in India works.