16.07.2007

  • I noted some salient points about natural gas pricing from an article that appeared in today’s ET. I recommend reading it once. Look at the salient points in today’s Discover It here.
  • Bonus stripping
    • The act of buying shares at cum-bonus price and selling at ex-bonus price to book capital loss is called bonus stripping.
    • The steps involved are:
      • An investor holds/buys cum-bonus shares.
      • Holds them till stock becomes ex-bonus when share price gets adjusted on the basis of ratio.
      • Ex-bonus adjustment is followed by the record date which is fixed to ascertain bonus entitlement.
      • Investor sells his original holdings fully/partly after the record date and books capital loss.
      • New bonus shares are credited to investor’s demat account.
      • Capital loss is set off against capital gain at the end of the financial year.
  • Indian households’ investment patterns
    • The Indian households are having an increasing exposure to equities. The share of stocks and debentures in their savings has increased to nearly 5% by March 2006 from 1.1% in the previous year.
  • Problems in the US economy
    • Growing current account deficit
    • Negative household savings
    • Over-valued asset markets, notably housing
    • Over valued currency
  • The lessons that remain unlearnt, with regard to the East Asian Financial crisis
    • Joseph Stiglitz, a Nobel laureate in economics lists them out as below.
    • The first is that capital market liberalization – opening up developing countries’ financial markets to surges in short-term ‘hot’ money – is dangerous. It was not an accident that the only two major developing countries to be spared of the crisis were India and China. Both had resisted capital market liberalization. Yet today, both are under pressure to liberalize.
    • The second is that in a highly integrated world, there is a need for a credible international financial institution to design the rules of the road in ways that enhance global stability and promote economic growth in developing countries. With the IMF so dominated by the US (it is the only country with a veto) and Europe (which, by custom appoints its head), the Fund was long seen as representing the interests of international creditors. Its past failures have underscored its limitations.

3 comments:

venkat said...

Hi Ramky,

Bonus stripping, can you explain me in an elaborate manner?

wt is cum-bonus & ex-bonus?

thanks,
venkat

ramkyc said...

For eg., let's say Reliance is trading at Rs. 1000 cum-bonus. It means that when Reliance announced bonus the price of the share was trading at Rs. 1000/-. Let's assume for a moment that the bonus declared is in the ratio of 1:1. It means that for very one share of Reliance held by an investor, one additional share (bonus) will be given to him, as on the record date. Record date is announced soon after the bonus decision. Anybody holding shares as on the record date would be given the bonus. Soon after the record date, the price of Reliance will come down (usually) nearly by half. This price is what is called ex-bonus price. Anybody who purchases the shares now will not be entitled for the bonus, because it is after the record date.

venkat said...

Now i got it.
thanks a lot,

venkat