Market Update

S&P CNX Nifty 2984.35 +45.65(1.55%)
RIL 1532.20 +79.75(5.49%)

I mentioned earlier that Reliance Industries(RIL) which commands a significant weightage in Sensex/Nifty would drive/drag the markets further. Todays trade was interesting in this standpoint as Reliance closed 5.49% higher on the Nifty. This means a break of short term resistance of 1401 and 1451. Having broken the critical resistance levels, RIL would contribute to the rise of Sensex and Nifty. For Nifty, I suppose we may well break the resistance level of 3100 in the absense of any negative news.

Though it may sound bullish, I remain cautiously bearsish on both the Nifty and Sensex. Traders can certainly make use of market movements and capitalize on absence of global negatives. For investors, part-invest at these levels and choose your stocks with caution.

Picking a gem

A lot of people follow the markets more closely than most of us do. They are probably financial gurus in their own right looking for gold by reading between financial statements. But yet, some fail to understand that the best pick is not all about finances and balance sheets! They are all about people who run the business.

Back in 1994, I dont think any financial guru saw enormous value in Infosys unless he did a people analysis and evaluated the management strength which was less hyped those days! Who would have seen value in investing with Dhirubai Ambani in the late 70's. I think to a large extent, the internal stakeholders and the people who know the key people are the best ones to pick a successful story. Financial statements always carry the tag better read as - "Statements are mere indicators of past and present performance and represent no promise on future performance"!

If you were to pick a gold mine, remember - its people first, and then the processes and systems build within. For novices, there is no easy way to judge management talent. But, the current media to a large extent is more helpful in this respect(only in comparison with the past). My journey in investing, I hope would move to the next level of idetifying future gems than just plain investing. Happy investing -:)

Realigning investments

Given the current economic scenario, equity as an asset class has taken a severe beating and would continue to remain weak for some time. What other options does one have to generate consistent returns?

At this point, the SIP way of investing makes perfect sense for investments in equity or equity focussed mutual funds. However, one needs to keep in mind that the returns from equity will not be immediate and will take longer to recover. Given this, one can consider churning(selling) a part of the MF/equity portfolio and investing in fixed instruments like company fixed deposits or government securities. Of the two, I would prefer company fixed deposits as these offer attractive returns on investment. On an average(at the time of writing), company FD's offer about 8-11% returns on a YOY basis. However, one should be careful in investing in company FD's and must not be lured just by returns. As a thumb rule, it is safer to look at companies offering less than 13%(looking at the current interest rate scenario). Secondly, look at the ratings and liabilities the company is sitting on. It may not be advisable to invest in companies with huge liabilities.

Recommended portfolio structure:

Fixed instruments 40%
Equity and equity related instruments 20% [Recommend phased accumulation for long term]
Liquid instruments 30%
Debt instruments 10%

I have reduced the weightage of debt instruments as I expect them to yield on par/below fixed instrument returns. At this point, I would prefer avoiding other asset classes like Gold and real estate. Its a great idea to accumulate gold systematically. However, it shouldn't be looked as a short or medium term investment. It is my view that Gold should be looked from a comsumption perspective. Buy as much as you can consume.

For more information on company fixed deposits, click here

Tracing Back

S&P CNX Nifty 2622.40 -52.20 (-1.95%)

On Jan 28 2009, I posted a technical update indicating a break of support (2524) within a month. Though, we may be a few days away before the support breaks convincingly, the statement didn’t completely hold. Subsequent posts on Nifty triggering a fall to 2678 once 2848 breaks held pretty well.

For traders, today’s close is extremely important and given the environment(in the absence of any positive indicators), the market should break 2553 soon. It is advisable to exit positions and wait for the next bottom.

The merger of RPL with RIL is pretty much a non-event and an expected one. I wouldn’t be surprised if the ADAG group comes up with a merger of its power subsidiary Reliance Power with Reliance Infra soon. This however, is not going to impact markets in any way.

Alarming signs!

S&P CNX Nifty 2763.65 -22.00 (-0.79%)

How could one explain a perfect U-shaped recovery on the back of dissappointing Q3 GDP numbers? Well, global markets didnt expect the worst even when the sub-prime news was beginning to scare early Jan '08 and talks on India de-coupling from the West were taking shape!

Frankly speaking, there's more to worry than just GDP numbers. The Ruppee(INR) is at a new low versus the US dollar. Its not so great news when exports are under pressure and imports don't seem to slowdown. This would only add to India's alarming fiscal deficit. This is time for action from RBI which is expected to review the rates soon. With inflation at under 4%, I don't think a rate cut is necessary. Its time for RBI to step in and control the ruppee fall, if not the INR can go beyond 55 a dollar!

There's another way of looking at it. A strong dollar would encourage more inflows and make outflows less attractive. From the FII data, I dont see any change in sentiment - they have been net sellers to the tune of 2,420 crores(equity) for the month of Feb '09(as on date). However, there's a positive sign in that the debt investments have seen a constant increase. The months of July, Aug, Sept and Nov '08 saw huge inflows to debt from equity.

Ignoring alarming signals and not bottoming out now is only going to slow down the pace of recovery. Investors might need to wait a bit longer for the next bull to start and happen. Traders can trade within the narrow range keeping 2678 as stop loss on Nifty.

Reading the fineprint

The past few days have been full of important developments, both positive and negative. One, US government prompt clarified their stance on nationalization after Citi fell massively in Europe and Dow. Its a positive signal from the government indicating minimum government control in privately run banks. It might sound great at the face of it, but I don't think its going to be easy sitting outside the table especially when you have pumped in such a lot of money into the banking system.

The government should certainly have its representatives on board to establish governance mechanism and regulatory framework. Some banks had recently announced huge bonuses, though in absolute terms, they were much less than the previous year. It will be hard to imagine US banks like Citi doing this, as they are accountable for every penny they spend. Having government representatives on board will help stem such acts. It is going to take couple of years to weigh the impact on IT companies like Infy, TCS and Wipro. It will take a few years until these companies show performance on their balance sheet. The action plan before the new government is to first restore normalcy, create a balanced economic environment through stimulus and create jobs. Outsourcing cannot happen at the expense of these three. You cannot create IT jobs at a remote location when the core-jobs and business is dissappearing! Clearly for IT, its too early to expect a big turnaround.

S&P rating brought some basis to my sell recommendations! S&P is right in pointing out the huge fiscal deficit, but more than anything, the next government needs to act with restraint. The present government has already done all that it could. The next government should focus more on reducing expenses, inviting investment(FDI or otherwise), provide sops for new businesses and not just provide tax relief. I'm sure the next goverment would be tempted to announce tax concessions, sops and so on. A clear restraint and focussed policy on distribution of money from the rich to the needy would alone solve problems. You need to encourage spending across all categories and classes and policies must clearly move in that direction. Lets wait and watch!

Markets on Monday

Citigroup Inc (C) 1.97 -0.54 (-21.51%) 12:36 PM ET
C Quote (NYSE Echange)

European markets were the first to sense the danger of nationalization of US banks early in trade today. Citigroup was hammered in European as well as US markets in trade today. At this point, Citigroup lost 54 cents to trade at $1.97, a drop of 21.51%. Will Indian markets feel the jitters on Monday? Well, I dont see any impact on Indian banks per say. But, IT is going to have a jittery start for sure. TCS which bought over Citi's backoffice for Rs 2,400 crore should be in deep pressure. Nationalization of banks would directly impact outsourcing as critical processes cannot be lawfully outsourced. Given this, the deal is currently under question and the terms of the contract need to be read out. Infy and Wipro might follow suit and contribute to the fall as they derive considerable amount of revenues from BFSI. Lets wait and watch!

Satyam - Questions unanswered

Sometimes, its hard to believe how the very best of companies fall like pins! Satyam has been India's success story - no one can dispute its top 5 status even now given its talent base, clientele, geographical presence and offerings. Yet, one man who built from scratch was responsible for its fall overnight!

While legal agencies may establish truth and the board may establish credibility and impose the ethical way, it still baffles me as to why the entire thing happened in the first place. Is it greed on part of the individual promoter or is it pressure from sons/family which led the exercise? Maytas for sure had its green days because of Satyam, its capital which was fraudulently transferred(if media reports are to be believed). But, why would a promoter of a multi-billion dollar company use such fraudulent means to invest in a company which is not even half its size? There are many more questions to be answered, but these would probably never be as the matter is sub-judice.

For one, I would strongly recommend Satyam promoters to take up a teaching role in a B-school. I am sure many would learn from their mistakes and realize the importance of ethics in business. B-schools can teach a number of case studies, but none can teach ethics per say. As I write, there is a sense of displeasure on what transpired. What was once a top-notch truly global IT company is today looking at potential acquirers! This is certainly the worst thing to have happened to Indian IT.

Support Quality Rankings of MFs

Over the past few months, I have been in constant interaction with the support groups of some well known mutual funds. Here, I decided to summarise my experience and rank them based on their quality of response, timely resolution and turnaround time taken to resolve the problem.

1. Franklin Templeton Mutual Fund: I like the funds timely response and structured way of answering to customer queries. Their response time is generally 24 hours through email and they make an effort to call the customer in case of any discrepencies. I was pleasantly suprised to see a status note sent to my address stating "We're working on your issue and will get back".
On the cons, they seem to miss out reading some finer details in the form like request for online access etc which most of the popular mutual funds do!

Overall, I would rate the experience as positive.

2. Kotak Mutual Fund: I rate the fund higher based on their response times through email. They are the only fund to send a stamped receipt within 48 hours of receipt of your investment application. In terms of support, they generally respond within 24 hours through email.

3. Sundaram BNP Paribas Mutual Fund: Their response time through email is very low. They take 4 business days to respond via email! Inspite of the pitfalls, they seem to have minimal issues with regard to form processing. They dont provide an online investment access and advice to be registered with some brokers like ICICIdirect, HDFCsec etc if at all online access is required.

4. SBI Mutual Fund: Their response time is usually 2-3 business days. They work like a PSU in certain aspects, so you would have to face inconveniences if you need things like online access, unit transfer etc. You would need a legal transcript even to request online access! Well, I dont blame them - its just that they want to play it safe in case of any problems, but then its a hassle and additional expense at the hands of the investor.

5. Reliance Mutual Fund: Their response times through email is great. But then, there is little sync between the front office and back office. If you have scratched or corrected inputs in your form, then you could be in for trouble as the back office people often tend to take default inputs in such cases. They are not so prompt as others in terms of issuing acknowledgements, physical statements etc. But, then they do follow up with the usual sms or email if the facility is opted.

I have not reviewed other funds outside the ones discussed above. As and when I review them. I'll post them for the benefit of readers. Hope you find this useful.

Selling spree

S&P CNX Nifty 2770.50 -78.00 (-2.74%)

Almost every market internationally was in the red signalling a selling spree. All sectoral indices were in red today - its a great time to build a watch list and start value investing. I'll be posting my watch list soon once critical levels break.

On the charts, we're close to breaking support as discussed earlier. The short term bull-pattern discussed here didnt hold. So, we're clearly headed down further.

Market Technicals

S&P CNX Nifty 2848.50 -99.85 (-3.39%)

Structurally, there’s nothing to conclude from the fall today though it was encouraging to see some good volumes in many stocks today. For the short term, today’s close would be the support. If the market breaches today’s close tomorrow, then we could well be headed to 2678, which is the next important level to watch.

Until the market breaks the pattern shown in the chart, we can safely conclude the following.

1. The Nifty top of 3121 would not be broken in the next couple of months and upside is limited to 3050-3075 levels.
2. Nifty might well be ranged between 2848 and 3050 for the next 6-8 weeks. The range would get narrower and eventually trigger a fall.
3. The previous analysis holds. The bull within the bear cycle would come to an end as mentioned here.

Dow and Nifty: Key Takeaways

S&P CNX Nifty 2925.70 -8.80 (-0.3%)
Dow 7915.24 +26.36 (0.33%)

It’s encouraging to see the out performance S&P CNX Nifty has had over Dow. While Dow is just a few hundred points away from its 10-year support, S&P CNX Nifty hasn’t yet broken its 3-year support! For Nifty, I see another leg of fall dragging down to the 5-year support level. So far, Nifty has been defying every bearish analyst and has outperformed the Dow and some global markets during the last couple of weeks. While there is so much uncertainty in the US, the exuberant bailout package should be more than a respite. News reports suggest the size of global bailout package to be greater than the size of Indian economy! Indian GDP which derives more than 50% from services would slow down as global economies pump in money locally. Its not the best of the times for export driven economies and in specific export driven companies. We are certainly going to see some more pain in sectors like IT, autos and auto components and metals. For now, I see PSU banks and FMCG as defensive bets in the current scenario. Its encouraging to see some stellar performances from defensive's like McDonald's Corp in the US. While the Dow took a severe beating over the year, McDonald's has shelved only 15% from its 52-week high!

The first growth signals and the strongest should emerge from the US and Europe. The first rise and probably the most rewarding ones would come from sectors which are heavily beaten down in the turmoil. It’s probably one of the better times(if not the best) to part-invest in US equities. Finally a note - "When investing, always keep the return constant and not the time frame of investment".

Market Technicals

S&P CNX Nifty 2849.50 +78.15(2.82%)

I had a good look at the Nifty charts today with a view to predict the next fall. As mentioned earlier, 2524 remains the level to watch and if this breaks, Nifty would head for the next big correction. If you look at the short term(3-months) charts, Nifty made a previous low of 3816 on 16th July 2008 and then entered a bull run within the bear cycle. The critical level of 3816 was breached on 6th Oct 2008. The next low of 2524 was made on 27th Oct 2008. Nifty made an attempt to breach this low on 20th Nov 2008 and closed at 2553.

I see a similarity in patterns between the two cycles, the one between 16th July - 6th Oct and 20th Nov - present. Going by this logic, the next fall(breaking support of 2524) should come within a month.

Viewpoint : Selecting Mutual Funds

I have often wondered if it makes sense selecting mutual funds for investment. Once you have marked your top 10 funds for investment based on ethics, values and actions, there is little difference between them. Have you ever wondered why a fund rated five-star a few months back doesn't even feature in the top 20 list today? Let me explain with an example.

Lets say, you bought Reliance during the month of Jan '00 with a 3-year view. For the period, you would have seen returns of 15-20% on the stock. If you extended your time frame by a few more years, you would have seen a compounded return of over 100% atleast! It is almost impossible to give a time-frame and a ranking of stocks which would give you an assured return within the expected time-frame! In the same way, it is impossible to predict if a fund would outperform within the time span of 3 years.

What one needs to view is the strategic fit of the fund in ones portfolio. Choose the best managed funds based on ethics, best practices(timely portfolio disclosures, transparency etc) and most importantly the funds(or fund managers) actions. If you aren't comfortable holding a fund with high PE multiple, portfolio structure or high equity allocation, you should refrain from investing in such a fund.

While one can rank funds in order of returns on a daily basis, note that the returns are not an indicative of future performance(the tag line at the end of every mutual fund advertisement has a deeper meaning!). While HDFC Tax saver doesnt feature in top 5 based on returns over a 3-year frame, it cant be written off as a non-performer. No rating can explicitly guarantee a funds future performance. The only guarantee is your comfort level based on the factors discussed above. For instance, I wouldn't like to invest in funds which make delayed portfolio disclosures and where I have little clarity on the fund managers actions. At the current stage, I would be comfortable investing in funds with greater cash/debt exposure as I believe this would be the best strategy for long term outperformance. Henceforth, it makes sense to select funds based on base parameters discussed above. However, to say, that one fund is better than the other or rate it in some way has no meaning!

One needs to hold patiently till the fund reaches an optimum sell value. If you have fixed your time frame, then your investment may not yield best benefits. For instance, while "ABC" fund may yield 100% returns over a period of x years, "XYZ" fund may yield the same returns over a different time frame. The compounded annual returns for both funds would be the same or marginally different, it is only the holding time-frame which varies.

In my previous articles, I have recommended funds based on my comfort level(looking at economic indicators and the fund managers actions) and hence does not say anything about the future performance of other funds which were not analysed. "Keep the return constant, not the holding time-frame for the chosen fund".

Market Technicals

S&P CNX Nifty 2846.20 +17.75 (0.63%)

Technically, we're very close to the next fall. I predict the fall to start after 27th January '09. It is to be noted that we're trading on very low volumes. Any positive movement with such little volumes is a critical warning.

Note: The date quoted is not an astrological prediction but a mere approximate after analysing medium term Nifty charts.

Market Technicals

NSE 2736.70 -98.60 (-3.48%)
Dow 8200.14 -248.42 (-2.94%)

Market fell on the back of heavy selling by European banks including UBS. The close below 2744.95(yesterdays close) is a negative sign. For the next few days, S&P CNX Nifty is headed down.

Dow is inching closer to its 10-year support of 7591. I suspect it is only a matter of time before this breaks signalling that this is the worst phase US has seen in a decade. The economy would take a while to recover, but US would probably lead the world in recovery and would be the first one. Investors need to look at key economic indicators like the industrial growth, housing data etc before investing in bulk. Selective investing for long term is certainly a wise thing to do at this stage.

Buy JK Paper

JK Paper NSE 15.55 -0.3(-1.89%)

With a PE of 2.84, BV of 49.3 and dividend yield of over 9%, there is nothing to dispute a buy on the stock.

Top ELSS buys - Short Summary

1. Magnum Taxgain [Relatively safe due to high cash exposure]
2. Reliance Tax Saver [Relatively safe due to high cash exposure]
3. Sundaram BNP Paribas Taxsaver [Like the overall portfolio structure except for the addition of Satyam during Dec '08]
4. Principal Personal Tax Saver [Good buy when market bottoms out. Avoid at this point]

Apart from the above, one can look at Kotak Tax Saver and Franklin Templeton TaxSchield for investment. I advice an SIP for six months duration(Jan '09-June '09) for better risk mitigation.

I'll review the performance of the recommended funds on a periodic basis.

Note: In terms of service, I dont rate Sundaram BNP Paribas MF too high. Their response time is one of the lowest in the industry(4 working days).

Analysis - ELSS Funds(Contd..)

My impending analysis on ELSS funds would help choose some of the best managed funds for investment. As the financial year ends, many would cram to invest in tax saving instruments like ELSS, insurance, PPF and Bank FDs. Many may feel it wrong to invest in equity at a point when the world is going through an uncertain phase. Well, I would say, this is probably a good time (if not the best) to invest. If you invested without fear during 2007 and early 2008, there is no reason why you shouldn’t in 2009 when the markets have shelved more than 60% of their gains. However, I would recommend a 20-40% investment in equity (or equity linked tax saving instruments like ELSS) for the current financial year depending on your risk appetite. The remaining should be invested in a mix of instruments like bank FDs(5yr), insurance or PPF.

I analyzed 3 funds in my previous analysis and would add some more here.

1. Fidelity Tax Advantage

I don’t like the fund for its undisciplined approach to important disclosures. They don’t seem to disclose their latest portfolio information as quickly as some of the prominent funds do. Their latest portfolio is dated a month back (30th Nov ’08) as on today. So, I am analyzing based on their disclosed portfolio available as on date.

Asset Allocation
As on 30/11/3008

Equity 87.58%
Debt 0%
Others 12.52%

The funds equity position is more or less unchanged from the previous month. The fund has reduced exposure in RIL (5.96%), HDFC (4.23%) and Infosys (2.39%) while added exposure in ITC (4.89%), Bharti Airtel (4.60%), SBI (4.18%) and HUL (3.77%). The fund has marginal exposure to Satyam. While I like the fund manager’s actions, I think the fund still has huge exposure to RIL. At this point, I am negatively biased on the stock. In my view, funds need to have very little exposure to oil refining companies when oil prices internationally are under tremendous pressure. RIL would face margin crunch and would probably report flat numbers. Given this, I would have liked if the fund manager exited the holding completely or maybe reduced the exposure to less than 2% of the portfolio. The fund manager has also not increased his cash exposure and hence wouldn’t benefit as much.

Investment Valuation Stock Portfolio

Portfolio P/B Ratio 4.01
Portfolio P/E Ratio 14.75

Even though the fund has reduced its P/B and P/E as compared to the previous month, both the ratios are on the higher side as compared to other funds analyzed here. Hence, I recommend investors to invest in small quantities (<10%)> Again, it’s important to note that I am comparing this fund based on November ’08 data whereas other funds mentioned here are based on December ’08 data. I’ll review again once the fund releases its latest portfolio structure.

2. Kotak Tax Saver

Asset Allocation
As on 30/12/2008

Equity 82.18%
Debt 8.85%
Others 8.97%
I like the significant cash/debt exposure of the fund. Debt would yield superior returns than equity in the short term.

The fund reduced exposure to Bharti Airtel (4.25%), ONGC (3.03%) and HUL (2.62%) while increasing exposure to RIL (3.45%), ICICI bank(3.013%) and HDFC Bank(2.97%). The fund introduced NTPC during the month.

Investment Valuation Stock Portfolio

Portfolio P/B Ratio 4.19
Portfolio P/E Ratio 15.13

The fund would do well when the market picks up. However, for the short term, I see more downside. The funds P/E and P/B are high as compared to other funds analyzed here. I recommend investors to invest in small quantities.

3. Magnum Tax Gain

Asset Allocation
As on 30/11/08

Equity 77.30%
Debt 1.34%
Others 21.36%

I am analyzing the fund based on November ’08 data as the fund has not declared its latest portfolio as on date. The fund has increased its cash exposure significantly. This is positive considering that call rates have moved up in the short term. In the medium term, the fund would gain by entering stocks at lower levels.

The fund reduced exposure to RIL(4.21%), HDFC(3.29%) and L&T(2.95%) while increasing exposure in ONGC(2.78%), Bharti Airtel(2.66%) and SBI(2.19%).

Investment Valuation Stock Portfolio

Portfolio P/B Ratio 2.45
Portfolio P/E Ratio 13.97

I am comfortable with the funds P/B and P/E ratio and believe the fund is well positioned to capitalize on every downside. The fund has been making the right moves and hence I recommend buying the scheme.

4. Principal Personal Tax Saver

Asset Allocation
As on 30/12/08

Equity 83.41%
Debt 0%
Others 16.59%

The fund is sitting on good amount of cash which is a positive. The fund has increased exposure to RIL (4.82%), ICICI Bank (4.03%), Jindal Steel & Power (3.54%) and Bharti Airtel (3.24%) while reducing exposure to Crisil (3.07%), Indian Bank (2.51%) and Pantaloon Retail (2.3%). The fund has introduced Infosys Technologies and Cipla during the month.

Investment Valuation Stock Portfolio

Portfolio P/B Ratio 2.33
Portfolio P/E Ratio 11.73

I am comfortable with the funds P/B and P/E ratio and believe the fund is well positioned to capitalize on every downside. The fund has been making the right moves and hence I recommend buying the scheme.

5. Reliance Tax Saver

Asset Allocation
As on 31/12/08

Equity 79.05%
Debt 0%
Others 20.95%

The fund is sitting on good amount of cash and is well capitalized to benefit through phased equity investments in a falling market. The fund increased exposure in SBI (5.86%), Areva T&D (5.71%), HUL (4.06%) and Triveni Engineering (3.8%) while reduced exposure in Cipla(5.54%), ICICI Bank(3.72%), Infosys Technologies(3.36%) and TCS(3.29%). The fund is making the right moves by reducing exposure to technology and depending on old economy stocks like SBI and HUL.

Investment Valuation Stock Portfolio

Portfolio P/B Ratio 4.24
Portfolio P/E Ratio 14.99


The funds P/B and P/E ratios are on the higher side. However, considering the cash levels of the fund, the fund is well poised to capitalize once the market stabilizes. Considering all factors, the fund is a relatively safe investment in a falling market and would be a value buy once the market stabilizes. I recommend buying the scheme.

Investors should make use of market volatility in the coming weeks/months to enter into schemes listed above. Some salaried investors may need to look at dates set by employers for tax-proof submissions and then decide on the time of investment. Ideally, the best time to invest would be closer to Nifty support levels. I have pegged medium term Nifty target at 1800.

Market Technicals

S&P CNX Nifty 2920.40 -192.40(-6.18%)

All important medium term support levels mentioned earlier still hold. On the monthly charts, 2857 is the level to watch for Nifty. If Nifty breaks this, then the next level to watch would be 2657. I maintain my bearish stance on S&P CNX Nifty.

Satyam fiasco

Satyam NSE 40.25 -138.7(-77.51%)

This day would probably marked in history. Satyam's scandal of not reporting factual numbers is a serious dent on companies of its size and holding. This too will pass, but there are some key takeaways:

- First and foremost, I have always said that it is important to integrate ethics with leadership. And this should happen right from the grass-root level. With each demanding circumstance, the credibility of leadership is tested. People irrespective of nationalities, geographies and races, need to understand the important of ethics. Everything else comes second.

- Mr. Raju's letter to the board cites no knowledge of the scandal on the part of senior management or board members. Its hard for me to believe that no one else knew about the scandal. It brings me to question the roles of Satyam's senior management including the CFO and some key people in important functions! What did the auditors do? Were they merely employed to sign the dotted line?

- At the grass root, it is clear from Mr. Raju's letter to the board that the fear of being taken over is the primary motive behind the scandal. First, what can companies do to prevent this? Well, I believe, promotors and associated parties need to have a majority stake if they want complete control of things. A minority stakeholder cannot assume total control at all times. If you look at companies like Infosys, the promotor holding is as low as 16.51%(as on Sept '08) whereas the public holds the majority. Institutional investors command a higher weightage than promotors. So, there is ample chance to fear a takeover in case of Infy. Even though, the current circumstances may not warrant such an event, the future looks uncertain. The bottom line is - If companies are averse to a takeover or merger, it is safe for them to have substantial promotor holding. If not, one must leave it to what the majority shareholder wants.

- I believe there are many more companies like Satyam who have fudged data. Companies need to pay heed to the warning and report factual data. If not, another "Satyam" among them isnt a distant probability.

This too will pass, but for Satyam, the road has come to the end within a few days! What took over 20 years to build has now collapsed like pins. Satyam would probably need to be re-branded after acquisition or otherwise.