Monday, January 21, 2008

Investors lose over $300 bn in six days

Investors on Dalal Street have lost over $300 billion (Rs 11,85,285 crore) in the last six days with more than half of the loss coming from Monday's fall of the benchmark index Sensex - its biggest ever. The 30-share index Sensex today witnessed a fall of 1,400 points, tumbling below the 18,000-point to close at 17,605.35. The huge drop in the index was led by blue chip heavyweights - Reliance Energy, ACC, Bajaj Auto, DLF and Reliance Industries. The Sensex has lost 3,222.1 points in last six trading sessions, while investors' wealth - measured in terms of cumulative market capitalisation of all the listed companies - has declined by Rs 11,85,285.46 crore. The total market capitalisation stood at Rs 59,53,525.87 crore at the end of today's trading against Rs 71,38,810 crore before bourses began business last week on January 14.
Mangal Keshav Securities’ institutional equities head Jay Prakash Sinha said most good dividend-yield stocks have been out of favour as investors look for quick capital appreciation. “Good dividend-yield stocks are out of favour as their number is going down. Traditionally, a yield of over 7% is considered good,” said Mr Sinha. There are hardly any stocks with such a high yield, he added. Typically, established companies have a higher dividend-yield. Smaller entities pump profits back into the company to fuel growth and as such their yield is low. Interestingly, Benjamin Graham, who is generally considered as the father of value investing, included this yield as an important part of his rules. ‘The investor is best off concentrating on the real life performance of his companies and receiving dividends,’ was his view. Indeed, there is proof that this still holds true. UTI Mutual Fund’s Dividend Yield scheme is among the top four performers of the fund house. In the past one year, the fund has clocked returns of 55.17%. The Sensex gained less than 35% in the same period. In the past three months, the scheme has gained nearly 12%, while Sensex appreciated by less than 6%.

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