Precautions to be taken at petrol pump

Select your petrol pump with care

1. Wherever possible patronise company-owned and company-operated petrol pumps (COCO) that are manned by the oil company officials themselves.

A note of caution here: many petrol stations claim they are COCOs whereas the fact is that they are run by contractors.

One of the best company-owned stations that I know of is an HPCL station behind Hotel Ashok in New Delhi.

The Reliance COCOs are also excellent in respect of delivering the correct quantity of fuel.

2. Another method of identifying stations that don't sell a lot less than one pays for is to go to those stations that are patronised by three-wheelers. This may not be possible in Delhi, Mumbai and Bangalore as all 3-wheelers have shifted to CNG, but this rule-of-thumb can be applied to those cities where 3-wheelers still run on petrol (Pune, Hyderabad, etc.). These auto rickshaw drivers check mileage after every refill and use their own methods like dipping a foot-ruler into the tank to know if the pump has delivered the correct quantity or not. And they are always right in their assessment!

3. It is best to patronise stations, which have the newest pumps like the multi-product dispensers (MPDs) installed to service customers. MPDs are believed to be quite tamper-proof and hence they will deliver correct quantity of petrol. I have even found that many dealers complain about MPDs delivering excess quantities due to the voltage fluctuations!

Many high selling stations in big cities are equipped with MPDs. I can say from experience that the old mechanical pumps can be easily manipulated to sell short.

Often check your car's mileage

1. One good way to know if your regular filling station is delivering short or not is to top up your tank. It is dangerous to top up the tank to the brim. The best method to top up the tank is to get the fill-up from a pump that has an auto-cut-off nozzle.

The moment the nozzle cuts off the fuel supply, stop filling up at that point. Note your car's odometer reading. Let's suppose that the odometer reading is 8,000 km. After a few days, come back to the same pump and again fill up using the auto-cut-off nozzle. Note the odometer reading again. If the odometer reading reads 8500 km and on the second turn you bought 30 litres petrol before the pump nozzle cut off then your car has given a per litre mileage of (8,500-8,000)/ 30 = 16.6 km per litre.

2. You should repeat the same exercise at other stations. The station that gives your car the best mileage per litre is the best station for you. In fact, this exercise should be carried out as many times as possible to eliminate any inaccuracies that might creep into the results due to varying traffic congestions on different routes at different times.

Be alert when you enter a petrol pump

1. Always ensure that before the fuelling process is started the pump board display reading is set at ZERO.

What might have happened in Joseph's case is that the customer who was serviced at the pump before Joseph bought 15 litres of petrol and when Joseph's turn came, the salesman started filling up his car tank with the pump display showing 15 litres. He stopped after the pump display showed 30 litres. Joseph thought that he received 30 litres, but in reality he got only 15 litres.

2. Come out of your car while the salesman fills up your tank. Many salesmen at some petrol pumps indulge in sharp practice. I have known a station in Delhi, where the moment you position your car near the pump island, a salesman will come near you and engage you in polite conversation while his colleague at the other end would pour some of the petrol not into your tank but in a container hidden from you!

It is therefore best to come out of your car and stand near the point of sale to ensure that you are not at the receiving end of any such sharp practice.

3. Instruct the salesman to deliver the fuel slowly. Unbelievable as it may seem, the fact is that several pumps (even the swanky electronic Z-line pumps) are adjusted in such a manner that if the fuel is dispensed at a fast pace, the quantity actually dispensed is less than what you pay for based upon the display reading on the pump board. It is advisable that the salesman is instructed to deliver petrol at a slow pace.

You may end up getting more fuel than you pay for, much to the chagrin of the canny dealer. I would add here that not all dealers have perfected this manipulation of pumps and that only a few dealers practice this 'art.'

Lodge a complaint if you feel you have been short-changed

1. Oil companies are quite swift in attending to the complaints that they receive in writing. It is no use asking the salesmen for the complaint register. He will always say that it is locked up in the cupboard or may cook any other excuse. It is better to lodge the complaint on the Web site of the oil majors or send a written complaint to their office.

The phone numbers and the office address are prominently displayed at the station and the complaints are quickly attended to.

2. Being informed about your rights helps. It is your right to know if the quantity being dispensed to you is correct and it's the dealer's duty to provide all necessary assistance to you. Consumer rights and the duties of the oil companies are contained in the Citizen's Charter issued by the oil companies and endorsed by the Union petroleum ministry.

Each station is required to keep a five-litre calibrated measure (certified by the Weights and Measures Department) and you can demand that the measure be filled up in your presence to let you know the if the pump is dispensing accurately or not.

I would even suggest that in case you feel strongly about something, please call up the field manager of the respective oil company and fix an appointment with him at the petrol station. He will personally enlighten you about the various checks for assessing the quality of the product, like the simple density test. He may even agree to draw samples of the product and will deliver it to the ISO accredited laboratory. He will also deliver to you the test results. Oil companies have changed over the years and the field managers deployed are amongst the best officers working for the oil PSUs.

So next time you enter a petrol station, be alert so that you are not duped.

Also don't forget to tip the salesman if you are happy. These guys are poorly paid and if we all leave some small change for them, they may even give up this sharp practice.

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Buy these Two Top Stocks which will make you rich

Head of PCG of Emkay Share & Stock Brokers, Avinash Gorakshakar discusses his favourite picks - GMM Pfaudler and Manugraph.

Gorakshakar maintains a 'buy' on GMM Pfaudler at Rs 676 with a target price of Rs 1,046. He likes this stock because it is a market leader and it caters to three large growing sectors like pharmaceuticals, specialty chemicals and agrochemical space.

He gives a buy call on Manugraph at Rs 230 with a target price of Rs 380. He expects  the company to record topline growth of roughly about 20-22 per cent to about Rs 387 crore next year. He further informs that this company is a debt free business.

about GMM Pfaudler

GMM Pfaudler is basically a niche player in the glass-lined chemical reactor market. It is a 51 per cent subsidiary of Pfaudler US, which is a world leader in the glass-lined reflector equipment market.

We like the stock because it is a market leader and it caters to three large growing sectors like pharmaceuticals, specialty chemicals and agrochemical space. This business is a niche market and except for Nile Limited, which is a domestic competitor, there is no other company in the market, which caters to this business.

As far as the business is concerned, the specialty chemical market and the pharmaceutical market will provide large triggers for the company. The company recorded a revenue of roughly about Rs 102 crore (Rs 1.02 billion) last year with a bottomline of Rs 12 crore (Rs 120 million), and a recorded EPS of roughly Rs 42 for 2006.

This company has got an equity capital of Rs 3 crore (Rs 30 million). This is a debt free business and very high return on capital and return on equity, kind of return ratios, which is roughly about 30 per cent and 40 per cent.

Going forward, the company has got a decent capacity build up. They do not require large capex to be incurred over the next 12-18 months. So our sense is that the company will continue to remain debt free and whatever cash, it actually throws up, is likely to be put up in liquid investments. In fact, the company holds liquid investments to the tune of about Rs 26 crore (Rs 260 million), as of March 2006.

Coming to valuations, our sense is that the company would be recording 30 per cent growth in topline for 2007, which is about Rs 132 crore (Rs 1.32 billion) for 2007 and 2008. We believe that company should average out a topline of roughly about 25-26 per cent, which works out to about Rs 165 crore (Rs 1.65 billion).

Manugraph is the other stock

Manugraph is one of the largest manufacturers of the offset printing equipment machinery in India. It controls about 70 per cent of the market and its clients are all the frontline newspapers. These include The Times of India Group, Hindustan Times, Indian Express and Deccan Chronicle.

In fact, there is no other newspaper, which probably Manugraph has missed out. But what really excites us about Manugraph is the fact that its business model is firmly in place. It is into a niche segment, where technical skill sets are very important and price competitiveness is also very critical.

The company competes with several European as well as American manufacturers in the global market. If one observes the company's topline growth in the last three-four years, there has been a consistent increase of roughly about 24-25 per cent.

More importantly, in the last four years, the asset turnover levels of the the company have gone up significantly. Working capital cycle has been considerably reduced and this has been amply reflected in the EBIDTA margins. Today, this company enjoys an EBIDTA margin of 26 per cent, which is typically very high in the engineering space. This was just about 10-11 per cent about four years ago.

So the company has managed to keep the technology in line with the customers requirements and also in line with the financial and capital structure side, the company has done a pretty good job. In fact, this company earned a return on capital employed of 79 per cent for 2006 and return on equity of around 61 per cent. It is a debt free business. The company has got a very small equity capital of Rs 6 crore (Rs 60 million).

Last year's revenue was roughly about Rs 322 crore (Rs 3.22 billion), on which the company earned EBITDA of Rs 83 crore (Rs 830 million) and bottomline of Rs 55 crore (Rs 550 million). The company's share is of face value Rs 2. The company's EPS for last year was Rs 18.

We believe that next year, the company should record topline growth of roughly about 20-22 per cent to about Rs 387 crore (Rs 3.87 billion) and bottomline of about Rs 70 crore for 2007, which works out to an EPS of Rs 24. For 2008, we expect that the topline should be about Rs 450 crore (Rs 4.5 billion) plus and bottomline of about Rs 84 crore (Rs 840 million), giving an EPS of around Rs 28.

The company has another opportunity in the export market. The company is a very large exporter already. It exports about 32 per cent of its revenues to very developed markets like Italy, Germany and France. But now the company is seriously looking at markets like China and North America, which incidentally are the largest markets for the newspaper market. We believe that these initiatives would actually bring rewards in the next 18-24 months.

Finally coming to the valuations, as I earlier said, the company is a debt free business. The company is likely to throw a lot of free cash in the business. Capex is also quite moderate, the management has indicated that the capex would not be more than Rs 20-30 crore (Rs 200-300 million) over the next two years. Therefore we feel that the cash element per share on the balance sheet would be roughly to the extent of Rs 27 by 2008 on a face value of Rs 2.

As far as multiples are concerned, the stock trades at a multiple of roughly about 9 times at a price of around Rs 230 discounting 2008 numbers. On EV/EBITDA basis, it trades roughly at EV/EBITDA of 5 times for 2008.

For a company, which has shown a return on capital and return on equity in excess of 60 per cent, and which has consistently changed the balance sheet and improved the quality of earnings over the last three-four years, we believe that this company should not be looked purely as a printing equipment manufacturer.

But it should actually be compared with other engineering players. It is a complete solution provider; it is not just a printing manufacturer, per se. Therefore our belief is that the stock should get re-rated. We have given a buy at Rs 230 with a target price of Rs 380.

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3G arriving in India

Indian mobile operators are on course to spend up to $6 billion to offer third-generation mobile services to users.

According to initial estimates, which do not include the spectrum fee (at least Rs 1,050 crore each for a national rollout), operators are planning to set up 75-80 million 3G-enabled connections.

Bharat Sanchar Nigam Ltd alone is setting up 30 million lines, while the other operators will add another 45-50 million lines over the next 2-3 years.

With the total subscriber base expected to double from the existing 100 million, the operators' investment can be assumed at an average $80 per subscriber for enabling high-speed web surfing and streaming video services.

Users will need to buy handsets separately, which will be around Rs 5,000-7,000 for the average entry level device.

The $80 price is derived from the $65 MTNL recently paid for a partly 3G network. The final price will be available as soon as BSNL's existing tender is finalised. Bharti Airtel's tender for 3G is also expected soon.

The estimates for investment take into account the fact that 3G services are likely to be made available first in metropolitan and other big cities. Even there, the target users will be the top layer of the subscriber base.

The average cost would be much higher at $135 per user, and 3G users would be confined to the "creamy layer", said Cellular Operators' Association of India Director-General TV Ramachandran. This is a figure substantiated by NK Goyal, president, Indian Manufacturers' Foundation.

The Telecom Regulatory Authority of India had recommended a minimum spectrum fee of Rs 1,050 crore for a pan-India 3G spread.

Compared with the entry fee paid by the fourth mobile operator some years ago, the Trai formulation is 47 per cent lower. The final price to be paid will depend on the department of telecommunications' decision on minimum fee as well as the bidding by the operators.

Operators need to erect an overlaying network � one parallel to their existing networks � to start 3G services. Investment for GSM operators is expected to be much lower than for CDMA operators who, an equipment vendor said, would need to upgrade substantial portions of their network.

For GSM operators, the upgrade will primarily be incremental, and involve installation of new base stations. They will mostly be able to use their existing towers. For CDMA operators, it will virtually be a new network.

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The Best smart phones in the market

Most smartphone users follow a simple daily routine. They enter their offices or even homes, zip out their smartphones where a message pops up: "Do you want to join the wireless network (wi-fi)?"

A single click on "Yes", and off they go to Internet land. Millions of smartphone users check their email every minute, browse the Net for hours, download music and gaming applications every week and all this is through mobile phones.

Exchanging images, ringtones and contacts over bluetooth connections has also become a favourite office activity nowadays.

Smartphones are best described as phones with standard phone keypad for input (as against PDA-based devices that have a touch-screen for pen input).

Compared to standard phones, smartphones usually have larger displays and run on powerful processors. The mobile handset market can be broadly divided into three key classes, the basic vanilla phones (that the majority of us carry), the multimedia-capable feature phone (smartphones begin to stem from this category), and the application-extensible smartphones and PDAs.

Alex Lambeek, VP mobile phones, sales and market operations, APAC, voices his concern, "The problem is that existing sales channels are reasonably effective in getting smartphones into the hands of users but then many do not download multimedia applications which a smartphone is capable of, once they leave the store."

Nokia, apparently, is high on smartphones. The company not only leads when it comes to the number of smartphones in the market but also announced the launch of N95, another addition in its N-series.

The phone comes with inbuilt GPS capabilities, dedicated music features, a 5-megapixel camera and can be upgraded up to 2 GB, which can take care of a user's multimedia demands.

The phone will be launched in India in the first quarter of 2007 and is priced at Euro 550 (or approximately Rs 45,000). Not to be left behind, Sony Ericsson has unveiled the P990i in India.

The smartphone is wi-fi enabled, has a 2-megapixel camera and promises an internet experience with full HTML pages. At Rs 33,000, the P990i supports push mail and comes with an internal memory of 80 MB (expandable upto 4GB).

Manufacturers are only buoyed by encouraging forecasts that predict smartphone market to garner around 40 per cent of the total handset market (globally) by 2008, which at present is approximately 25 per cent.

"Smartphones are fast gaining traction among businesses, which see the devices as enhancing productivity, particularly among sales staff and other remote workers," says Lambeek.

But he predicts that the "phone's vanity" can be expected to open doors for style savvy consumers in the near future. That explains why Nokia has some of the most chic-looking smartphones like the N91 (an enhanced version with 8 GB memory is expected to hit markets next year), N80, N70 and N73.

A smartphone, underline industry maestros, is designed to allow the mobile worker to stay connected while away from the office. "Smartphones also have the ability to gain time in one's day by allowing them to do work while travelling, instead of waiting to get to a laptop or desktop," they argue.

Driving on the consumer's desire to carry fewer devices, a feat that can only be accomplished by a smartphone's multiple capabilities, Samsung has launched SGH-i320 and i750 smartphones.

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Invest in these midcap stocks in IT and other sectors

Mid-cap IT

The mid-cap IT space is also expected to witness action as the stocks offer value, and the valuation between large- and mid-size scrips has widened considerably.

3i Infotech

The company is a leading player in the IT products and services space. The stock provides a huge upside potential as it trades at an attractive valuation of 12.2x and 9.5x for FY07E and FY08E, respectively. Further, its strong order-book position of over Rs 200 crore (Rs 2 billion), increasing share of high margin products and inorganic growth strategy make it an ideal mid-cap IT buy.

Sasken

The company's exclusive focus on the telecom space, a list of elite tier-1 telecom customers such as Nortel, Nokia, Intel and NTT and its strategy of offering both services (embedded R&D outsourcing services) and products (software for mobile phones) augur well for its growth.

Further, Sasken's acquisitions of Botnia Hightech and iSoftTech have enabled it to augment its services and client portfolio. Sasken is a major beneficiary of increased telecom outsourcing to cut costs and its sector-specific technical know-how. The stock trades at 22x and 11x for FY07E and FY08E, respectively.

Ship building

Summet Rohra, analyst with Antique Stock Broking, strongly recommends companies in the ship-building industry such as ABG Shipyard and Bharati  Shipyard, which are trading at P/Es in the range of 10-11 and 7.5-10 for FY07E and FY08E, respectively.

Bharati Shipyard

The interest in private sector ship-building major, Bharati Shipyard, is mainly on account of the company's entry into the oil rigs business, which is in high demand. Offshoring drilling count in India is expected to double in the next five years with more exploration activities opening up.

Also, there are only a handful of shipyards worldwide that can build drilling rigs. The company is the first domestic player to enter the business.

Bharati Shipyard has tied up with a well-known US-based oil manufacturing firm to develop the same in its new site at Mangalore. The company's current order-book position stands close to Rs 1,500 crore (Rs 15 billion), with the unexecuted position at Rs 1,200 crore (Rs 12 billion) (4.5 times the 2005-06 turnover).

ABG Shipyard

The country's largest private sector shipyard, ABG Shipyard, is even larger than Bharati in size and revenues. It mainly caters to manufacturing of vessels for the petroleum industry, the demand for which is likely to remain strong in the near future for many reasons.

A large proportion of global offshore fleet is over 20 years old and is due for replacement. Also, the volatility in crude oil prices has led to increase in oil exploration activity.

Besides existing facilities, the company is building a new shipyard in Gujarat at a cost of Rs 400 crore (Rs 4 billion) to be commissioned in the beginning of FY09. Its order-book position -- to be executed over the next 30-36 months -- remains strong at Rs 1,625 crore (Rs 16.25 billion).

Other stocks

Gateway Distripark

The shipping and logistics industry is thriving on upswing in the country's foreign trade. Also, volume of containerised cargo handled at the ports is increasing.

This is expected to benefit Gateway Distripark (GDL), the country's largest private sector player in handling, transporting and storage of containers, warehousing of cargo and various other value-added services provided in importing and exporting of cargo in containers.

Though GDL's financial performance in Q1FY07 was not very impressive, analysts are bullish on its stock given its strong position in the robust demand for containerised traffic scenario. The stock has underperformed and is trading at 15x and 12x for FY07E and FY08E, respectively.

WS Industries

The valuation of WS Industries, manufacturer of porcelain insulators for use in the transmission of electricity, makes the stock attractive. At Rs 58.5 it trades at 11.7x and 8.4x for FY07E and FY08E, respectively.

However, Sharekhan values its core business at Rs 60 per share and its realty venture at Rs 80 per share.

The company has devised a three-pronged strategy -- expanding the current capacity of hollow core insulators from 5,000 tonne to 6,000 tonne, setting up of a greenfield plant of 8,500 tonne and stabilising the source of rental income through the realty venture. In joint venture with TCG, the company plans to develop 15 lakh sq ft space into a state-of-the-art information technology park.

Indo Tech Transformers

Chennai-based distribution and power transformer manufacturer Indo Tech Transformers is expected to benefit from the immense potential in the sector, believes Suresh Parmar, senior associate - equity, Darashaw Broking & Investment Banking.

It has been projected to grow at a robust rate of 16-18 per cent over the next couple of years. The company raised Rs 51 crore (Rs 510 million) through its initial public offering in February this year to fund the expansion of its distribution and power transformer capacity and set up a new dry-type transformer plant.

The Indo Tech stock has significantly underperformed the Sensex ever since its listing in March this year, and is now trading at 11.3x and 8.6x for FY07E and FY08E, respectively.

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Best midcap stocks to invest in cement, construction and textile sector

Best bets

Parmar of Emkay feels that despite a decent run-up in the past few months, cement, capital goods, engineering, IT and banking stocks have room to deliver 25-30 per cent return, on an average, over the medium term. Following is a low down of some of the top picks of experts:

Cement stocks

Cement stocks -- large-cap or mid-cap -- are still hot picks for many market experts.

The demand-supply mismatch resulting in firm prices and higher capacity utilisation is here to stay for at least two more years, irrespective of regional presence.

In September, cement majors like Gujarat Ambuja, ACC and the AV Birla group reported healthy growth of about 16 per cent, on an average, in their dispatch numbers.

Other players are also expected to report similar growth. Cement prices too continue their northward journey. The average price for the July-September period reported a staggering growth of 29 per cent year-on-year at Rs 204 a bag (of 50 kg), thanks to the hectic activity in the housing, infrastructure and industrial segments.

UltraTech Cement, Shree Cements, JK Cement, Madras Cement, India Cement, Mysore Cement and Kesoram Industries are market experts' top picks. And many of them are trading at reasonable valuations, given the robust growth potential.

Construction stocks

After being bruised badly by the market in the recent past, as they plunged by 20-30 per cent from their peak levels, some construction stocks such as Nagarjuna Construction, Gammon, IVRCL, Era Construction and HCC have recovered marginally, but they are still attractively priced.

Though their performance in the June quarter was not so impressive, despite strong demand, and some companies also faced margin pressures owing to rising input costs, market players are confident about their positive outlook.

In fact, at the end of the June quarter, most companies had healthy order book-to-sales ratio in the range of 3.5-5x.

Textile stocks

The domestic textile industry has failed to deliver returns and has underperformed all sectors despite the immense potential in the business. However, selective stocks such as Gokaldas Exports and Alok Industries seem to be good buys at present.

Gokaldas Exports

Gokaldas Exports, the country's largest garment exporter, trades at a P/E of 14x and 10.7x for FY07E and FY08E respectively. Mutual fund houses such as Fidelity and Prudential ICICI mopped up close to 8 lakh shares in early September at around Rs 625.

The company has drawn an aggressive expansion plan that includes setting up of new units at Chennai, Hyderabad and Mysore, increasing its client base and improving the product portfolio. It also intends to take its garment capacity close to 40 million pieces a year.

Besides, the textile firm will invest Rs 100 crore (Rs 1 billion) in setting up a unit through its group firm Gokaldas Exports Apparel & Textile Park in the 400-acre special economic zone near Bangalore to produce 1.5 million pieces a year.

Alok Industries

After Welspun and GHCL, Alok Industries, a manufacturer and exporter of home textiles, apparel fabrics, garments and polyester yarns, has been another player going in for global acquisitions.

The acquisition of 60 per cent stake in Mileta International of Czech Republic -- with its well-known brands -- for euro 13.97 million, will give the company a foothold in the highly competitive and fashion-conscious European market.

Besides, the third phase of its Rs 1,100 crore (Rs 11 billion) expansion plan is expected to complete by March 2008. All this initiatives will accelerate its growth rate and the stock is available at attractive valuation of 6.5x and 4.9x for FY07E and FY08E, respectively.

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Analysis of choosing the best midcap stocks

Connie D'Souza, like millions of other investors, burnt his fingers in the market mayhem of May with large-cap and mid-cap stocks dwindling to single digits.

Although for a couple of months now, his investments -- especially in large caps -- have recovered as the market is closing in on its earlier highs, D'Souza continues to worry about the mid-cap stocks he has stayed invested in.

Questions like 'will they ever perform again?' and 'if yes, when?' haunting him all the time. And like D'Souza, a large number of retail investors are wondering why mid-cap scrips are not being able to match the performance of large caps in terms of returns.

The fall and rise

While the Sensex is just 1.53 per cent or 193 points away from its all-time high of 12,612 scaled in May, both the BSE Mid-Cap and Small-Cap indices have to cover a good ground, lagging their record highs by 12.5 per cent (753 points) and 18.7 per cent (1,500 points), respectively.

Further, while more than half -- 53 per cent, to be precise -- of Sensex stocks are currently trading at their all-time high levels, the corresponding numbers are just 11 per cent and 5 per cent in case of the Mid-cap and Small-cap indices, respectively.

In fact, with the May havoc, the scenario has turned dramatically dismal for mid-cap and small-cap scrips as they have since then been hit much harder than their large-cap counterparts.

Sectoral performance

Banking, cement, technology and engineering stocks have outperformed the broader market in the current rally, while power, pharma, FMCG and auto scrips have remained laggards to some extent. Metal stocks have turned to be a mixed bag.

Says Ajay Parmar, head of research, Emkay Share and Stock Brokers, "In any market rally, all sectors do not move in tandem, and defensive sectors such as FMCG and pharma tend to lag others."

In the mid-cap category, while banking, cement and real estate stocks have continued to put up a good show, construction, auto ancillaries, IT, pharma, sugar and textile counters have failed to cheer investors.

Time to buy mid caps?

Despite their underperformance in the recent past, there are a good number of experts who back mid caps even now. Jasani believes that at present mid caps have more upside potential than large caps.

Similar is the view of Kedia, who says, "Mid-cap and small-cap stocks are expected to witness some action, particularly after the second quarter results after which they might get re-rated. The mid-cap segment provides a huge opportunity in terms of choice as mid caps outnumber large caps by as many as 10 times."

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Invest in Share market Stocks Wisely without any risk

Everyone knows that investing in equity is risky. However, the risk taking abilities of investors vary. Some don't think twice before investing everything, including the kitchen sink, in equities.

And yet there are the risk averse others who cannot bear losing even a rupee of their capital. Most of us are somewhere in between.

But what if one could invest in equities with the guarantee of not losing capital? In other words, what if you could have your cake and eat it too? I know, most of you must be thinking such a thing isn't possible--- such a Utopia doesn't exist.

Through this article, I will introduce the readers to precisely such a Utopia. And I am not even talking about the capital guaranteed schemes that are soon going to be launched by various mutual funds.

These schemes apart from being close-ended will invest a large proportion of funds in fixed income instruments, thereby making the return comparable at best with a well-to-do MIP scheme.

Instead, I am referring to pure unadulterated equity pleasure without taking a single iota of risk as far as loss of capital is concerned. To know how, read on.

Here's what must you do. Invest Rs 6 lakh (Rs 600,000) in the Post Office Monthly Income Scheme (POMIS). POMIS gives interest at the rate of 8% p.a., which means per year you would receive Rs 48,000.

As it is a monthly income scheme, the interest per month works out to Rs 4,000. Now, this is fully taxable. Assuming you are in the 30% tax bracket, the net balance after tax left with you would be Rs 2,800.

Now, enter into an SIP (Systematic Investment Plan) with this amount of Rs 2,800. POMIS is a six-year scheme. So basically, you would invest Rs 2,800 per month for six years.

At the end of six years, you would receive the market value of your mutual fund investment and also the capital amount of Rs 6 lakh invested in POMIS.

Consequently, while you have kept your capital intact, you still have taken on equity with all its associated risk.

To see how this strategy can actually work out, we ran some numbers. Say, you started your POMIS account in September 2000. The monthly interest was invested in Franklin Templeton Prima Fund on an SIP basis.

By adopting this simple structure, at the end of six years, the investor would have received around Rs 9.45 lakh (Rs 945,000) just on account of the mutual fund investment. Add to it the capital amount of Rs 6 lakh of POMIS and the total investment would net a cool Rs 15 lakh (Rs 1.5 million). And this is after tax and without an iota of risk.

So who needs capital guaranteed funds?

Anyway, the point that I continuously make through my write-ups is that mutual fund investing is all about the long term.

We have seen how an SIP of Rs 2,800 per month has grown to a phenomenal Rs 9.45 lakh. However, the key here is that the investor kept up his investments for all of the six years, month after month, year after year.

How many of us have invested in a mutual fund six years back? And more importantly, how many of us still remain invested? The answer would most probably be none.

The reason in all probability is because we invest and disinvest based on what happens in the world around us. In other words, we react to world events.

Though I am not much of a crystal ball gazer, here's what I think will happen in the next six years:

The US Fed will raise interest rates. The US Fed will lower interest rates. Oil prices will rise and oil prices will fall. Commodity prices will fall. Commodity prices will rise. FIIs will intermittently pull out of Indian markets only to fall over themselves to get in once again. (Did someone say that this was smart money?) There will be terror strikes. There will be political upheavals, both nationally and internationally.

These things have taken place before our times, during our times and will take place after our times also. For, that is the way of the world. In the meanwhile, your personal net worth will solely depend upon how you react or more appropriately don't react to these events.

In another piece, we will discuss the reasons one should sell one's mutual fund. But none of the same appear in this article.

You want to win in the markets. Take the following words of Calvin Coolidge to heart: "Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent."

A six-year SIP was persistent enough. And look how much money it made.

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