Sunday, July 18, 2010
Sunday, July 11, 2010
Top-10 firms add over Rs 12k cr to m-cap
A rally in the telecom stocks late last week helped the country's top telco Bharti Airtel to earn a space in the elite club, with a market cap of Rs 1.17 lakh crore, and pushed out engineering giant L&T from the ninth place in the list.
During the past week, Bharti Airtel's shares gained over 16 per cent. On Friday alone, the scrip climbed over 10 per cent after Credit Suisse upgraded the major Indian telcos.
Corporate behemoth Reliance Industries (RIL) maintained its numero-uno status, though it lost Rs 4,121.09 crore from its m-cap last week. The total market valuation of RIL stood at Rs 3.45 lakh crore for the week ended July 9.
With a m-cap of Rs 2.76 lakh crore, state-run energy giant ONGC held the second position, though it saw an erosion of Rs 2,320.67 crore in its m-cap.
IT bellwether Infosys toppled state-run power major NTPC from the third position. Infosys added Rs 8,201 crore, the most in top-10 firms, to its m-cap,taking it to Rs 164,796.86 crore, while NTPC's valuation fell by Rs 3,380.64 crore to Rs 1.63 lakh crore.
Software exporter TCS climbed to the fifth slot by gaining Rs 6,067.32 crore to Rs 1.51 lakh crore. State-owned SBI earned Rs 6,577.36 crore and jumped to the sixth place. The m-cap of the country's biggest public sector lender stood at Rs 1.50 lakh crore.
Trading major MMTC fell to the seventh place and shed Rs 7,262 crore from its m-cap to Rs 1,43,245 crore. Last week MMTC stood at the fifth spot.
Power producer BHEL at the eight place saw its valuation swell by Rs 124.83 crore to Rs 1.17 lakh crore.
FMCG firm ITC suffered a loss of one place and finished last to shed Rs 639.14 crore taking its valuation to Rs 1.14 lakh crore.
Mid-cap funds post returns of 101% over a year
Sunday, April 25, 2010
Mid- and Small-Cap Mania
However, as always, investors need to be extremely wary of this space. Volatility and liquidity have always scuppered investors' gains in this space, mostly because by the time the mass of investors notice the action, things are already over the hill. You can make money in these stocks, but you need to be careful.
So let me give you a different perspective on small and mid-cap performance. One-year and six-month and year-to-date comparisons with the Sensex are all very well, but if you look just a little way further back, there's a different story to be told. From the peak that markets hit in January 2008, the Sensex is still down about 15 per cent. The BSE Mid Cap index, however is still down 31 per cent and the BSE Small Cap Index 36 per cent. The Small Cap Index may have risen 215 per cent from the bottom in March 2009, but to reach that bottom, it had fallen to one fifth its value. It takes a lot more than a 215 per cent gain to wipe out that kind of a fall.
As cautious investors know, these stocks rise a lot more than the large caps and then they fall a lot more too. This means that we need to have slightly different ground rules for such stocks. Here's how I think you should approach this space. The most important thing is that smaller companies should never be a major chunk of your portfolio. Everything depends on your personal risk profile but I doubt whether anyone should have more than 20 or 30 per cent of their equity portfolio in small caps.
Secondly, this is one area where investing through an open-ended mutual fund dedicated to smaller companies makes even more sense than otherwise. There are just about 60 or 70 investible large-cap companies in India but hundreds of smaller ones. The quantum and quality of information about many of these is several orders of magnitude poorer than large-caps.
According to the Value Research capitalisation criteria, companies totalling up to 70 per cent of the total market cap of the BSE are large cap companies. These are just 77 in number currently. Mid-cap companies are another 20 per cent of the total market cap and these number 209 currently. Small caps are the remaining 10 per cent and they are a humongous 2,899.
There could be a few hidden gems in that long tail but there's a lot of garbage as well. Since investors are eternal optimists, they firmly believe that they'll get that one gem that will turn out to be the next blockbuster. But let's face it. The chances of doing so are not great. Choosing the right stocks at the right time is simply too large an exercise to be feasible for the individual investor. When the markets start tanking, investing through a fund can also provide better liquidity. In small and mid-cap stocks, trading volume dries up very quickly in a negative phase. If you have invested through an open-end fund, you can always get out at a day's notice, no matter what.
At the end of the day, it's good to hear about smaller stocks doing well, and there's no reason why any investor cannot participate in the gains. However, the risks are higher and the traps are well-hidden. You need to go into this with open eyes and open ears.
Tuesday, September 29, 2009
Six of top 10 firms lose R19,000 cr in Midcap
However, state-run companies ONGC, NTPC, State Bank of India and private outsourcing firm Tata Consultancy Services together added Rs15,623 crore in their market cap for the week ended 26 September.
The country’s most valued firm, Reliance Industries saw the highest erosion in value losing Rs7,924.44 crore from its market cap, taking the total loss to Rs3,35,202.83 crore at the end of the week.
Mukesh Ambani Group company RIL’s market cap stood at Rs3,43,127.27 crore for the week ended 19 September.
Further, the market cap of trading major MMTC declined by Rs5,854 crore to Rs1,68,851.25 crore. While, power firm NTPC climbed to the third slot from fourth after adding Rs2,803.45 crore, taking its total market valuation to Rs1,75,257.25 crore.
Meanwhile, State-run oil firm ONGC’s market cap swelled by Rs1,411.66 crore to Rs2,47,531.43 crore. At the same time, private telecom services provider Bharti Airtel saw its market valuation erode by Rs645.46 crore to Rs1,57,322.07 crore.
Markets witnessed four day trade last week as Monday was a holiday.
The country’s largest iron ore producer, NMDC’s market valuation shrunk by Rs2,160.76 crore to Rs1,41,401.03 crore.
Public sector lender SBI climbed to the seventh position after adding Rs8,247.1 crore to its market cap, while IT bellwether Infosys Technologies slipped to the eight slot after losing Rs1,418.33 crore from its market valuation.
The total market cap of SBI stood at Rs1,35,810.36 crore and Infosys at Rs1,28,669.16 crore.
Top outsourcing firm, TCS added Rs3,160.88 crore to its market valuation, while power equipment-maker Bhel lost Rs1,089.18 crore from its market cap.
The total market cap of TCS stood at Rs1,14,897.43 crore and Bhel end the week with a total market valuation of Rs1,09,926.61 crore.
Apart from top-10 coveted firms, private sector lender ICICI Bank lost Rs405.26 crore from its market cap, while HDFC Bank added Rs4,064.47 crore to its market valuation.
At the end of week, total market cap of ICICI Bank stood at Rs93,378.11 crore and HDFC Bank at Rs68,675.43 crore.
In the club of top-10 firms, RIL is followed by ONGC (Rs2,47,531.43 crore), NTPC (Rs1,75,257.25 crore), MMTC (Rs1,68,851.25 crore), Bharti Airtel (Rs1,57,322.07 crore), NMDC (Rs1,41,401.03 crore), SBI (Rs1,35,810.36 crore), Infosys (Rs1,28,669.16 crore), TCS (Rs1,14,897.43 crore) and Bhel (Rs1,09,926.61 crore), in that order.
Wednesday, July 15, 2009
Best Multibagger midcaps & small caps in Indian stock market
- 3i Infotech 95.50 (Ex Bonus)
- ABC India 47.75
- Adlabs 340.65
- Aftek Infosys 115.65
- Agro Tech Foods 125.10
- Alps Industries 82.00 (Ex Bonus)
- Amara Raja Batteries 193.00
- Asahi India 120.00
- Ashapura Minechem 220.00
- Aztec Software 185.20
- Balaji Amines 113.65 (Ex Bonus)
- Batliboi 104.70
- Bilcare 640.05
- Biocon 493.75
- Blow Plast 120.00
- Centurion Bank 21.55
- Clutch Auto 125.00
- Crest Animation 141.10
- Crew B.O.S. 172.30
- Deep Industries 30.00
- Elder Pharma 262.80
- Emami 127.25
- Encore Software 30.15
- FCI OEN Connectors 407.55
- Flex Industries 101.90
- Gateway Distripark 220.75 (Ex Bonus)
- Genus Overseas 156.85
- GHCL 140.00
- Greenply 94.75
- Hind Org Chemicals 40.85
- Hind Sanitary 105.00
- Hitachi Home 87.00
- Honeywell Automation 1,088.45
- Hyderabad Industries 260.00
- India Infoline 162.00
- Infomedia India 178.55
- International Combustion 335.00
- ITC Ltd. 142.00
- IVRCL Infra 146.80 (Ex Split)
- Jagran Prakashan 210.80 (Ex Bonus)
- Jain Irrigation 243.00
- Jindal Stainless 97.40
- JK Paper 62.00
- Jyoti Structures 67.15 (Ex Split)
- Kajaria Ceramics 45.70
- Madhucon Projects 300.00
- Magma Leasing 165.00
- Man Industries 192.00
- Medicaps 92.00
- Mirc Electronics 21.90
- Navneet Publication 58.00
- Orchid Chemicals 210.00
- ORG Informatics 172.55
- Pantaloon Retail 299.35 (Ex Right & Ex Split)
- Patel Engineering 347.95
- Pokarna Ltd. 166.75
- PSL Limited 277.85
- Punj Lloyd 1,050.00
- R S Software 116.45
- Rajshree Sugar 140.00
- Ramco Industries 1,400.00
- Ramco Systems 317.25
- Ranbaxy Labs 362.35
- Ratnamani Metal 270.60
- Raymond 403.95
- Reliance Infra 293.80
- Sangam India 67.10
- Saregama India 226.60
- Savita Chemicals 226.80 (Ex Bonus)
- Shashun Chemicals 84.35
- Shipping Corp. 162.85
- Simplex Infrastructure 300.20 (Ex Split)
- South East Asia Marine 175.00
- SPEL Semiconductor 21.05
- Spicejet 82.45
- SREI Infrastructure Finance Ltd. 63.25
- Sterling Holiday 70.52
- Suashish Diamonds 104.60
- Surya Pharma 140.65
- Surya Roshni 64.15
- Suven Life Sciences 19.75 (Ex Split & Ex Bonus)
- Tata Steel 380.30
- Transport Corporation of India 55.80 (Ex Split)
- TTK Prestige 127.45
- TV 18 389.30 (You also got Network 18 after my Recommendation.. keep it)
- UB Holdings 262.40 (Ex Bonus)
- United Spirits 496.75 (You also got McDowell Holdings after my Recommendation.. keep it)
- Usha International 290.55
- Vadilal Industries 27.00
- Viceroy Hotels 112.00
- Wockhardt 445.00
- WS Industries 60.10
- Yes Bank 68.55
- Zicom 145.00
- Zodiac Clothing 294.95
Besides, these some more good stocks are Jupiter Biosciences, SKF India, Gillete, NRB Bearings, NIIT Tech, Macmillan, Hikal Ltd., JK Cement, Reliance Energy, Tata Tea, Voltas, Hotel Leela, Aditya Birla Nuvo and India Cements. These stocks can also be considered as good investment picks. All the visitors should do their homework thoroughly before buying any stock and if you feel comfortable then buy it. Everybody knows that a correction is eminent, but when it will happen, nobody knows. Stocks mentioned above are good companies in good businesses with good fundamentals.
Wednesday, June 24, 2009
Mid-caps trading at attractive valuations
| | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In the third and final series of interviews in Smart Portfolios, Kashyap Pujara, fund manager, Enam Direct, shares his current investment strategy, view on mid-caps, small-caps and his advice to investors with Rex Cano. Since the launch of Smart Portfolios on September 1, 2008, the benchmark BSE 200 networth, is now down a little over a per cent, while Kashyap Pujara's portfolio value has appreciated over 22 per cent till date. How has your strategy changed after the sharp rally? Actually, the rally witnessed is largely an outcome of the election results which has led to improvement in investor confidence and expectations of economic recovery. The change in strategy reflects the changed political landscape. The reason is that we could now see reforms being implemented which were earlier met with resistance. A stronger political landscape has ensured greater commitment of funds to equities.
Sectors where reforms can happen should be watched. These include insurance, telecom, education and banking. There would be thrust on infrastructure and power which needs investment and hence one can look at this space as well. How should one approach mid-caps and small-caps? This is a potential area to scout for investments. The future value of any investment is dependent on the price we end up paying to acquire it. If we end up paying higher, the future returns would be lower. To put things in perspective, there are yet lot of mid- and small-cap companies that are available at attractive valuations and hence it does make sense to invest bottom up. Though stocks are up considerably from their all time lows, they are yet available at close to book value which can deliver above 20-25 per cent return on equity. If one can gauge the management quality, the consistent performance and sustainability of returns, then such companies could trade at higher multiples to book value in the future. Are we in a bull or bear market? Bull and bear markets are typically a reflection of economic cycles that play out on an ongoing basis. There is an expansion cycle that typically ends with a business peak followed by contractions which typically ends with a recessionary trough. In general, due to greater integration of the world economy we have seen longer expansion cycles and shorter recession cycles. The developed world might yet be going through the contraction cycle which we term as bear market, however, emerging markets especially India, seems to have made a recessionary trough. Leading indicators like cement and auto sales are reflecting this to some extent. Hence my sense is that the worst is behind us and we would turn going forward. However, please bear in mind that the markets discount the future before it has actually panned out and hence we end up seeing higher valuations at bottom of the cycles and cheaper valuations at the tops. How should investors tackle the current market situation? The secret to successful investing is within each investor. As an investor, if you are a critical thinker who evaluates his investment decisions meticulously, invests with conviction, displays patience and defines a time horizon, then one can build a good investment portfolio over the longer term. The markets tend to oscillate between extreme pessimism to extreme optimism. As investors, we need to attempt to be realistic and not let other people's mood swings govern or affect our portfolio decisions. As veteran, Ben Graham has said, in the end, how your investments behave is much less important than how you behave. Hence for starters, define your return expectations, your risk appetite and risk taking ability, as ability to take risk and capacity to take risk differ, and hence set your expectations of return and risk accordingly. Define a time horizon and diversify appropriately so as to eliminate the unsystematic risk from your portfolios.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sunday, June 14, 2009
Small is beautiful… but can be risky too
S. Hamsini Amritha
Be it the world of cars or the stock market, “small” appears to be in vogue. In the equity rally that began early March this year, stocks in the mid- and small-cap space have delivered returns that trounce those of their large-cap competitors.
Wondering what makes these stocks so attractive? Well, it is their high-risk and high-return positioning that charms the most, though their low valuation also appeals to certain investors. Read on to understand why small- and mid-cap stocks, believed to be multi-baggers in the making, come bundled with higher risks.
Market capitalisation, an indicator of the value placed on a company by the market at that day’s price, is a product of its market price and outstanding number of shares.
While there’s no clear-cut demarcation to differentiate the stocks based on their market capitalisation, given the dynamism of the equity markets, it can be assumed that stocks with market cap less than Rs 2,000 crore fall in the small-cap category, while those above Rs 7,500 crore are of the large-cap genre. The ones that fall in the middle zone are the mid-caps.
Large caps – few surprises
Large-cap stocks enjoy a large scale of operations; have established business model and hence have lower uncertainty in business. Besides, analysts, fund managers and investors alike, closely monitor these stocks. So, while the risks associated with investing in large-cap stocks are known, their likely returns aren’t unknown either.
This makes large-cap investing safer and more suitable for investors who have little stomach to relish uncertainties in investing. This is also why large-cap stocks are most sought after during periods of uncertainty in the markets. But on the other hand, investing in small and mid-cap stocks comes with higher risks, given their lower scales of operation.
While some of the companies in this cadre are still far from establishing their businesses, others are relatively new in their sector — which makes predicting their future revenues tougher. But it is precisely this heightened business risk that sweetens their return potential significantly.
History has it that multi-baggers in most equity rallies are, more often than not, stocks from the mid- and small-cap category only. It is then no surprise that the current rally too saw the small- and mid-cap stocks return higher.
When benchmarked on their year-to-date returns, the mid- and small cap stocks have scored a stellar 80 per cent and 85 per cent returns, while the BSE Sensex gained by 60 per cent.
High risk, high returnThe desire to invest in smaller companies comes, from their ability to return higher. Sidelined by analysts and investors and weighed down by the higher degree of earnings risk, these stocks do not command the valuations that larger companies usually do in the stock markets.
For instance, while a large diversified company such as L&T commands a consolidated valuation of about 25 times currently, smaller ones such as McNally Bharat or Shriram EPC, which are in similar lines of business, enjoy a lower value. Why? While L&T has a wider business presence, large clientele and stable earnings outlook, the smaller ones compare less favourably with it on almost all these counts.
However, with the economy beginning to revive and credit availability easing up, investing in smaller companies may hold higher returns potential, with the advantage of a low base.
Not only do these companies hold the potential to grow at a higher pace; their earnings growth cannot also be easily replicated by their large cap peers either.
For instance, while net profits of Yes Bank have grown at a compounded rate of 53 per cent over the last three years, that of ICICI Bank has grown at about 10 per cent only.
It is this ability to scale high earnings growth that fuelled the recent rally in the mid- and small-cap space, once it became clear that the economy was beginning to get back into shape. For instance, between the cement major ACC and its smaller peers Dalmia Cements and Shree Cements, the stock performance of the latter two was way better in the run-up since January. While ACC delivered 68 per cent returns, the other two stocks registered 82 per cent and 131 per cent returns, respectively.
The trend was similar among stocks in other sectors such as FMCG and IT too. Infosys’ 38 per cent return since January appeared trifle when compared with the triple-digit gains recorded by mid-caps MindTree (117 per cent) and Hexaware (149 per cent).
Earnings trapBut if investing in small- and mid-cap stocks appears exciting, don’t turn a blind eye towards their earnings. While it is natural to get carried away by the seemingly low valuations, remember that they do so for a reason.
If the probability of these stocks to more than double their earnings is high, the probability of their non-performance is also equally high. Since their businesses are at a nascent stage, their earnings are highly vulnerable to a downturn. In 2008, a year mired with recessionary trends, the BSE Sensex declined by 53 per cent. But the mid-cap and the small-cap indices declined more, by over 67 per cent and 72 per cent, respectively.
This may explain why ACC trades at 13 times, while Dalmia Cements or Shree Cements trades lower at eight times and seven times. Here again, while the mid-caps are somewhat better off, it is their still smaller peers that become unpredictable during uncertain times.
Besides earnings risk, investing in small-cap stocks also bundles with it liquidity risk and higher impact costs. And since most small stocks sport a high promoter holding, the promoters’ credibility also becomes pivotal in determining the fate of your investments.
11 small, mid-cap stocks worth buying
Also because despite their recent outperformance vis-a-vis the large-caps, some fundamentally sound companies are available at investable valuations. And considering that there is limited value at the current juncture in large-caps, "we believe that mid-caps will take the baton in their hand as they have the potential to outperform going forward as concerns with respect to the segment would continue to get allayed with the passage of time," says the report.
Angel Broking, therefore, has selected 11 stocks from the small and mid-cap space representing different sectors such as auto-ancillary, tyre, hotels, IT, consumer durable, construction, packaging, logistics, pharma, cement and oil & gas. According to it, these companies are either expected to report improved financial performance over the next few years on the back of the economic recovery and/or are available at very attractive valuations, which warrant them as value buys.
Here they go:
The Amtek Group is India's leading auto components player in the forgings and castings space. The group has been aggressively pursuing an inorganic growth strategy and has also been rapidly scaling up capacity.
It has a track record of successfully exploiting synergies from its acquisitions and such integration benefits are likely to go up further.
Amtek Auto (AAL) has announced to merge Amtek India (AIL) and Ahmednagar Forging (AFL) with Amtek Auto by December 2009 or January 2010.
Considering the swap ratios, AIL and AFL are trading at 43% and 27% discount at Rs 44 and Rs 64. This provides an opportunity to enter Amtek Auto through AIL and AFL with a significant discount to its current market price.
Apollo Tyres (ATL), India's premier tyre company, is set to witness a turnaround in its fortunes post the decline in the global commodity prices. It is estimated to post 6.7% and 31.7% CAGR in revenues and earnings over FY2009-11E, respectively.
This is despite the slowdown in industrial activity, which will result in declining demand for tyres from the OEMs in the short term.
In the last nine years, the company did not lose any volumes even though there was a severe downturn in the commercial vehicles (CV) Segment in FY2001.
Over the years, ATL's average growth in volumes has been in the range of 16%. On the valuation front, the company has always traded at around 8x one-year forward P/E multiple. At the Rs 29, the stock is trading at 6.1x FY2011E EPS and 0.8xFY2011E P/BV, which is attractive.
Asian Hotels
The worst seems to be over for the hotel sector and the operating environment is set to improve post 2HFY 2010.
In case of Asian Hotels (AHL), given its sharp underperformance vis-a-vis peers, despite better earnings visibility, potential value unlocking through demerger and cheap valuations, we believe the company is an attractive play for investors to play out the consumer story.
At the CMP of Rs 301, AHL trades at attractive valuations of 6.2x FY2011E earnings.
The company is also the only smart cards manufacturer in India and this segment is expected to surge on demand from the telecom, banking and government sectors.
The company through bagging the Rs 5,000-cr ‘Aapke Dwar’ order has also opened up a new avenue for growth in e-governance.
BIL is expected to record CAGRs of 39.6% and 34.7% in top-line and bottom-line, respectively over FY2009-11E. At the CMP, the stock trades at 3.2x FY2011E EPS. Angel Broking recommends a Buy on the stock with a Target Price of Rs 235.
Blue Star (BSL), India's largest central air-conditioning company, is on course to scale greater heights riding on favourable industry scenario, superior project execution skills and its preferred status among institutional buyers.
BSL continues to be a major beneficiary of the strong growth momentum across various verticals, such as, SEZs and cold chain infrastructure amidst slackness in demand from the IT/ITES and retail sectors.Angel Broking believes that BSL's leadership position, noticeable high-growth prospects and first-mover initiatives in the emerging cold storage space will aid its growth going ahead.
It also expects BSL to post a strong 22.1% and 16.8% CAGR in revenues and earnings over FY2009-11E. At Rs299, the stock is trading at compelling valuations of 10.9x FY2011E EPS and 4.2x FY2011E P/BV.
Further, on the valuation front, CCCL is trading at a substantial discount to its peers, which is unjustified given its superior return ratios, de-leveraged balance sheet, strong order book, earnings CAGR of 30% and no equity commitment over the next few years.
Essel Propack (EPP), the world's largest packaging company, is part of the Essel Group. The company is expected to register an improvement in its performance on the back of low crude oil prices and stabilisation of new units.
The company may post 13.5% CAGR in sales over the next two years and record consolidated profits of Rs 44.4cr in CY2010, as against the loss of Rs 88.3cr in CY2008. At the CMP, the stock is trading at inexpensive valuations of 0.6x P/BV and 0.3x EV/Sales on CY2010 estimates. Angel Broking initiates Coverage on the stock, with a Buy recommendation and a Target Price of Rs 37.
GDL's presence at strategic locations and its ongoing expansion plans may make it a key beneficiary of the growing container traffic in India going ahead.
At Rs 88, the stock is trading at 8.9x FY2011E EPS of Rs 9.9 and 5.4x EV/EBIDTA of FY2011E. The stock is trading at attractive valuations on the back of our estimated Earnings CAGR of 15% over FY2009-11E
Going forward, the next leg of growth for the company is expected to come from the export segment as it leverages its API capabilities to create a sturdy business in the regulated and emerging formulations markets. Angel Broking estimates Ipca's net sales to post a CAGR of 16.9% and adjusted net profit to register a CAGR of 29.4% over FY2009-11E.
JK Lakshi Cement, a JK Group company, is an established cement player in north India. The company is increasing its cement as well captive power capacity. Cost savings on account of the decline in input costs, additional captive power and strategic tie up to source power would help the company maintain its margins amidst downturn. At Rs100, JKL is trading at an EV/tonne of US $47/tonne on FY2011 capacity, which seems to be attractive.
Shiv Vani Oil
Shiv Vani Oil & Gas Exploration Services (SOGES) is an integrated oil servicing company focused on onshore drilling and seismic surveying. It is the visible play on the huge upcoming investments in the Indian E&P segment. We expect SOGES to record a CAGR of 32.8% and 29.1% in top-line and bottom-line respectively, over FY2009-11E. At the CMP, the stock is trading at 5.1x FY2011E EPS. Angel Broking initiates Coverage on the stock, with a Buy recommendation and a Target Price of Rs 406.