Parchayi.com – Personal Finance Simplified

The India Fund Inc. now trades at a nearly 10% discount compared with a nearly 20% premium same time last year. The Indian stock market BSE index is now back over 14000 and stocks are doing well, however the premium on IFN does not seem to be improving. This is probably a good time to buy.

Premiums on Indian ADRs are also much lower than they used to be and it may be a good time to get in to those too. TTM is up about 18% since I bought some before my last post and that is without any increase to the premium. If the trend continues, the premium will rise too.

I opened a position in Tata Motors Ltd. a few days ago when the share price in Rs. dropped below 700. According to my ADR premium tracker, the premium on TTM had dropped to almost nothing (currently it is about 2%). Also TTM had dropped about 20% YTD then so I took that as a good chance to do some bottom feeding on this stock.

Tata Motors is one of India’s largest automakers and has shown consistently strong sales growth by meeting market needs. Tata also plans a 100,000 Rs. (roughly 2500$) no frills car for the Indian market and if successful expectations are for it to be a strong success. TTM, though already one of Indias largest companies has room to expand along with the growing Indian economy and it also has the potential to grow through exports (which so far are not really noteworthy).

A few days ago, I opened a position in INP (Barclays Bank Zero Cpn ETN(ITR) – see my previous post on INP) increasing Parchayi and my investment in India to 16% of our total investments.

A breakdown of our portfolio (including all stocks and mutual funds) shows 98% investment in stocks, 2% in bonds (via some mutual fund). Of the stocks 61% are US and 39% International. Of the International Stock 60% is in Emerging Markets and 40% in Developed Markets. Currently my target for our portfolio is 50/50 US/International and 60/40 Emerging/Developed so we are off the target portfolio as far as US/International goes, but my international part is exactly on target, by co-incidence more than design. About 28% of our portfolio is in individual stocks and the rest is in mutual funds/etfs.

As an investor it is always nice to have a target asset allocation and periodically check how far off you are. I have shown my breakdown by market but it is also nice to have a breakdown by cap, sector etc. to make sure that the portfolio is properly diversified. For example I realized that our portfolio is heavily weighted towards large cap stocks. So my next order of business is to increase mid-cap holdings. Our individual stock holdings are all in different sectors and the funds we own are mostly index funds that are not sector targetted.

It is a simple task to get all this information and it took me less than 5 minutes to get this information from different accounts.

The only auto stock I own is Nissan Motor (NSANY) and that has been relatively flat for a while and so far I have never commented on the auto industry. 2006 was a not a great year for Nissan (US sales down 5.3% compared to 2005), while both Toyota and Honda managed gains. However December was a good month as Nissan launched several redesigned models and managed US sales gains of 4.4% over 2005 against analyst estimtes of a drop in sales. I think 2007 will show a continuation in this trend as the Hybrid Altima should hit any time soon and the sexy new 2008 Altima coupe will be launched mid year. I hope to see the NSANY ADR hit atleast 27$ this year.

Toyota sales crossed Chrysler for 2006 and narrowly missed crossing Ford. In 2007 Toyota is widely expected to leap over both Ford and GM to become the number 1 automaker in the world. Worldwide auto demand seems to be increasing as US demand reduces and you probably can’t go wrong investing in Toyota, Honda or Nissan. I picked NSANY because it sported a lower P/E, has a good dividend growth plan and I like their cars!

Just as a side note, the strongest growth in 2006 % US sales was from Suzuki, worlds no 7 auto maker after (GM, Ford, Toyota, Chrysler, Honda, Nissan). Also Suzuki was the no 3. automaker by sales in the Japanese market in 2006 (after Toyota and Nissan) and sold more vehicles than Honda. Suzuki has done well otherwise too and it would be nice to have a Suzuki ADR on the US exchanges.

India Fund Inc. premium as of Dec. 1 was only 3.69% which is extremely low for IFN especially with the strong bull market in India. The BSE is at record levels nearing 14,000 and shows no signs of stopping. Inspite of this IFN has remained steady for the last few weeks causing its premium to drop. Also in the near future, there is a strong likelyhood of a dividend. It may not be as much as last years $5.53/share but I’m hoping it will be nice.

The other India Fund – Morgan Stan India Inv Fd – IIF was trading at a discount of 0.47% as of Dec. 1!! I don’t follow that closely but you might want to check that out as another option to invest in India.

In a previous post, I mentioned that I did not get oversubscribed shares for the India Fund Inc. However, that is officialy wrong. The shares got deposited today! Yipee. Some more free IFN for me.

The India Fund Inc. withdrew money from my account for IFN shares assigned to me from rights. I did not get any oversubscribed shares as yet so I’m assuming I won’t get any. Overall, the rights offer wasn’t such a great deal as the fund premium dropped significantly. I sold some IFN shares to pay for the new shares from rights and as the end result ended up getting a few shares free, not as many as I expected but it’s still free money

The India Fund Rights Offer Closed today. The offering price of the shares (95% of NAV at close on Friday) is $34.00, which would mean at a current price of around 38 represents a gain of 11%, far lower than I expected but still very decent for no effort. The Fund said shareholders subscribed to about 18.5 million shares (including oversubscription requests). The Fund however did not say when it will assign oversubscribed shares. As I mentioned before, the rest of the shares are already deposited.

Shares from the India Fund Inc. (IFN) rights offer deposited in my Scottrade account today, one day before the close of the offer. Oversubscribed shares have not yet been deposited, so I don’t know if I will get any. I hope I do. As of last Friday, the premium on the fund was 15%. Stay tuned to this space and I will post the premium at tomorrow’s close by Monday. I believe it will be less than 15% because IFN has been dropping inspite of a rising Indian market. But you never know.

Recently I read reports that PowerShares plans to introduce an India ETF in the US based on the Halter Index (HXI). However, HXI is not really an India Index. It is an index of ADR’s and companies in the US whose primary business is in India. The index consists of very few components and doesn’t really represent the Indian market as a whole.

What I would wish for is an ETF, based on the MSCI India Index – They have one in Singapore, how about giving us one in the US?

However, it should be noted that India Fund Inc. (IFN) and the Morgan Stanley India Investment Fund (IIF) have both been outperforming the Indian indices (BSE and NSE). I would assume they are also outperforming the MSCI Index?