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November 30, 2010

BSE Training Weekend Program….Interesting Mix of Participants….Enjoyed the interaction….slept in my Tie !

Conducted a two days Equity Training Program past weekend at the BSE Training Institute…Interesting mix of participants….from SEBI,Exchanges,Broking Houses,Youngsters from Top Schools & Colleges,Top Management from leading Corporates Houses in Logistics and Oil & Gas,Mutual Fund Houses….

….Interesting Interaction…. fair spread of the fair sex too made it interesting to pit how a Man thinks against how a Woman thinks in situational plays…..a lot of good humour too….one young lady was worried her fiance will slap her because she invested in Suzlon at Rs 80 and it’s now below Rs 50 !…any chance it will recover to Rs 80,she inquired !…her relationship was at stake !….ran through Live from the Net how to quickly and fundamentally assess Reliance Industries at Rs 962….raised possible Sensex Valuations going forward to 2012…check updated pages on the Blog on the Sensex….USA,PIIGS,India,China…..covered the economic crisis and impacts and risks…..favourable positioning of India…..covered ,albeit briefly,80 + companies as Possible Portfolio Selections based on Risk Profiles of the Participants….How Warren Buffett and Peter Lynch think……why Investors behave irrationally in given situations….great fun    

…..was on my feet from 9.30 am to 6.30 pm both days covering 17 exclusive presentations and situational plays with the participants…enjoyed all of it….but had to call my masseur early morning  to ease away the tiredness…and actually slept in my tie !

Hope we can now take this Program all over India

Cheers !

MOIL IPO Pricing attractive pricing band of Rs 340-Rs 375 ….but Allotment will be quite poor…Check out the Choice between MOIL and IFCI !

Government got Gold with Coal India’s IPO last month…It was a Win Win Situation all around…as Issue Size was huge the Retail Segment was oversubscribed 2.3 times and also benefited from the rollover of the unsubscribed Employee Quota …so allotments were good…max 199 shares at Rs 245 less 5% discount

And Now we have the IPO of MOIL….attractive Pricing Band of Rs 340-Rs 375….However the Issue Size is Small and the Retail Segment will be oversubscribed 20 times…..therefore the allotment will not be generous

…Now a Retail Investor can apply upto Rs 2 lakhs…….Minimum application in MOIL is for 17 shares and in multiples of 17 thereafter…..On a max application of 527 shares in MOIL expect to be allotted just 25 shares…If Rs 375 is fixed as the issue Price then with a 5% discount the cost to Retail Investors will be Rs 356.25….Currently the Grey Market Premium is Rs 240…thus on allotment of 25 shares the profitability will be @ Rs 258.75 from Cost…that’s a Profit of @ Rs 6500…thats a 3.3% return in a month on a Application of Rs 197625….that’s very good and quite probable…infact fairly certain 

…but consider this…Instead of Primary market IPO of MOIL,consider Secondary Market Investment of @ Rs 2 lakhs in 3400 Shares of IFCI @ Rs 59…IFCI has slipped sharply in this correction and is available at Book Value this year and is to apply for a Banking Licence….If it moves up by just Rs 3 to Rs 62 ,the gains will be Rs 10200…There is a strong probability that it may move up much higher in December but there is also a probability that it may drop even below Rs 59 ! 

So what would you choose ?…a certain smaller gain with little or no chance of any Loss or a bigger probable gain with some probability of loss too in December 2010 ! 

Loss Aversion Psychological Tests conducted by D Kahneman and A Twersky are quite revealing…They gave these Options to a Group to choose from

A : A sure gain of US $ 250

or

B : 25% chance of a Gain of US $ 1000 and 75% chance of no gain at all

84% of the Group opted for A over B ( with the same expected payout but much greater risk)

They then reframed the Question and asked the same group to chose from

C : A sure Loss of US $ 750

or

D : A 75% chance of losing US $ 1000 and a 25% chance of losing nothing at all

73% preferred the gamble (with an expected loss of US $ 750) over the certain loss and opted for D read more

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