equitideas

INDIA: SIMILARITIES BETWEEN 1990-1991 and 2011-2012

2011-12-14T17:40:00.000-08:00

India seems to be entering the 1990-1991 situation again and for the PM, then the FM of the company - this will be deja-vu.

A fiscal deficit which is balooning, a capital and current account deficit - inefficiency of the regulation (FRBM) coupled with high dependence on fleeting foreign investment (specifically FII not FDI) are weak links of the Indian sector.

Expect long funds to move money out of India and currency to depreciate causing a double whammy as deficit builds on further. Almost on the cusp of causing a balance of payment challenge in 2012.

Dr. Manmohan Singh will be facing the same challenges as in 1991 and will need to resolve to a similar solution

1. Fiscal responsbility and targetted, reduced subsidies

2. Focus on investment v/s expenditure by subsidies

3. Encourage export growth

4. Liberalize the economy and cut the red-tape to increase FDI participation in key sectors.

In my opinion, sectors to benefit in 2012 are Retail (Pantaloon, Shoppers Stop), Capital Goods (L&T, Punj Lloyd), Export Sectors (IT - Infosys, Wipro, TCS and Textiles) and Insurance (ICICIBANK, SBIN, HDFC, HDFCBANK)
Avoid Oil PSU's especially downstream segment like plague - until rupee normalcy returns or government shows keenness to take strong action
Everything assuming government is forced to action from the current freeze situation

STAY BEAR

2011-12-14T17:30:00.000-08:00

Equities, Real Estate and Commodities all seems stretched in India and globally given current income levels

Markets nearing crashing point. STAY BEAR, STAY CASH. If anything,spread money across currencies and between gold.

Only silver lining could be global liquidity splurge by Central banks co-ordinated and RBI cutting interest rates by more than expected for local reason, 50 or even 75 basis points. Trade on the upside, do not invest. Fundamentals remain weak

HOLD CASH AND GOLD, AVOID BUYS

2011-12-04T10:19:00.001-08:00

Central Banks are running short of policy tools and have reverted to direct liquidity infusion, and in a co-ordinated manner.
We seem to be entering a period of stagnation /deflation and all the monetary expansion will probably mask the data from a nominal standpoint for a few quarters - the medium term trend is painful

1. Simultaneous de-leverating of households, industrial sector and sovereigns will reduce global spending in real terms
2. Reduction in growth, in real terms, will mean painful contraction of incomes (for individuals, corporates and sovereigns) and lead to painful defaults where any of the entities are not able to pay due to increasing interest demands (rising risk profile) and reducing incomes
3. Sovereigns are introducing liquidity measures to pump the markets with cash, will have a nominal effect and delay the trickling of real impact : Indebtedness cannot be solved by a liquidity push, it can delay the invetiable. The only solution to indebtedness is deleveraging or default.
4. Either ways it will be a difficult time swinging between sub-normal growth or inflationary pressures (caused by liquidity push by central governments). Hot money in-and-out, especially EMs and even DMs is a possibility, especially on the equity and commodity sides
5. Markets entering unchartered territory where for the first time sovereigns will have the same challenge as individuals and corporates earlier, and that too on a significant scale world-wide
6. Sovereign defaults will be more frequently talked about in the coming quarters and I presume, competitive devalution will resume - which has now slowed after an initial burst in 2008-2009
7. Expecting equity incomes to be -ve, unless if trading on volatility. Do not expect EM markets, espeically India to outperform given global macroeconomics, condition of infrasturcutre (especially power sector), slowing policy - making, shutdown of privatization, high interest rate scenario and falling rupee
8. Avoid NIFTY, stay in cash. I'd prefer GOLD.

Markets on Boil, Trade Upside, Invest on Sharp Correction

2011-10-30T16:40:00.000-07:00

World market seems to be on an upsurage after the recent Eurozone announcements. However, all the announcements have done is pushed the can a few weeks to a few months down the road.

SYSTEMIC ISSUES ARE UNRESOLVED:
Systemic issues of high debt/GDP and reducing private consumption and public sector spend will contract economies widening Debt/GDP ratios. Both personal and sovereign balance sheets need to unlever. No long erm resolution is adopted:

Resolution 1: Euro as a currency is de-valued to promote export promoted growth
Resolution 2: Weaker sovereigns are banished out of the Eurozone in a systemic way and stronger governments recapitalized the banks with help from China/Mid-East, Other hungry investors
Resolution 3: No nominal devaluation, but increased inflation supported by current low-interest rates regime to devalue in real terms
Resolution 4: Sharp correction in prices of basic raw materials [Hydrocarbons, Metals, Crops] in dollar terms [Unlikely unless BRICS enter recession]

Since none of the resolutions are adopted in completeness, a solution seems elusive. However, by partially defaulting and partially recapitalizing the banks - the can has been pushed further down the road.

TRADING CALL: Trade on momentum of euphoria, go long but exit on profiting. Keep strict trailing stop-losses.

INVESTMENT CALL(Indian Market):

PSU Banks starting to look lucrative (Check exposure to Real-Estate, Power Sector before investing.Any bank low on both these sectors is a good investment candidate even at current prices).
Avoid commodities and real-estate.
Infrastructure (Roads) seems good to buy when the current euphoria ends and corrections begins (down 15% from current levels).
I am still undecided on Infrastructure (Power), with DISCOMS struggling and delays in generation sector. Will need to research a bit more.

Greece is not Lehman!

2011-10-05T16:47:00.001-07:00

Greece is not the new Lehman! Please... no one tried to save Lehman failing!! Everyone is pretending to save Greece, but only buying time to prop-up the real chance of zone failure - Spain and Italy. The EU leaders know well enough that once Greece defaults, all attention will fall over to Spain and Italy which are too big to be defended the same way. Everyone just kicking the can down the street and making it that much more difficult for Greece to recover....All efforts will eventually fail and move over to recapitalizing French and German banks. For now, however, Greece is the pawn between the real chances of Euro failure and the carrot to an IMF style recovery (Has that ever worked with a structural loan cycle situation before, however?) Oh YES: Forgot to add: Continue to remain bearish for the medium term, irrrespective of short bouncebacks. Structural problems remain.

Continue to be bearish... respect short team bouncebacks, but medium term outlook remains unfavourable

2011-10-04T14:43:00.000-07:00

Continued with bearish mode on the market, though more circumspect after the recent fall. Expecting an immediate bounce-back for NIFTY tomorrow given the US bounce-back later today. However, remain bearish on the market from a medium-term perspective. Unusual how none of the economists are using the 'D' word or the 'S' word... For people in countries like Greece, Italy, Spain - the real economy is almost entirely in a Depression mode with reduced consumption, excessive and abrupt tax-cuts and reduction in investment leading to sharper contraction. Add countries which might not be (or will not be in future) a part of Eurozone and it could lead to chaotic inflation exercised by currency devaluation (e.g. Countries in Mid-East, South-East Asia) For now, most of developed world seems to be in a Stagflation mode --- technicalities might be modified maneovured to attempt defy this. But that is what the median of the population is really experiencing. From a medium to long term perpsective, this might cause basic materials (Metal, Oil, Coal) to correct, but for now... bearish on equities in the short to medium run and bearish on developed market fundamentals, emerging market fundamentals with debts > 90% of GDP and bearish on leveraged balance sheets!

time to buy?

2011-09-30T15:04:00.001-07:00

Markets seem to have entered long term bearish mode - so for NIFTY overall, it is still an INVESTOR STAY AWAKE signal. Trading bets should be the order of the day, if to play.

From a mid-cap, small-cap perspective, a lot of the hit is already taken in. Expect fundamentals to improve based on:

a) Increased bearishness of growth outlook and slowing growth will reduce cost of raw materials

b) Rate cycle should cool down from here - don't see any further rate hikes coming with global growth uncertainty, so RBI will be forced to change its hawkish stance, and at the very least put an hold on any further rate hikes. Maybe even turn dovish and start cutting rates

c) With decreasing disposable income (real), expect consumption to trade for lower brand, less expensive products especially in the middle market range

All three should help companies not overly leveraged, having better control on costs and not dependent heavily on imports (given rate change challenges for INR with widening deficits)

Good time to start accumulating for value stocks. Will try to research and post stock specific ideas over the weekend

Inflate your ways out of indebtness

2011-06-27T15:34:00.000-07:00

Read a very reputed article which comapares ways countries can and try to deal with indebtness as is the case with US, most of the western world and even developing countries like India

1. Austerity: Does not work because mulitiplier effect of austerity from govt, especially in situations where Debt/GDP >90% does not work.

2. Grow your way out: Exteremely limited for developed economies, but for developing countries (e..g India), this is one possibility

3. Default: Plain and simple, if you cannot pay back - make it quick and surgical. Default and move on, maybe raising debt for now will be a challenge, maybe next 4 years will be painful, but you have a clean slate to begin with and hopefully the next generation will not bear the brunt (does anyone remember the UK of the 70s?)

4. Inflation: Possibly the worst option of all, but the most palatable to politicians - the impact is on the the prudent savers which is to inflate currencies so much and print out , so total debt outgo in the currency of choice is small. Called by different names, including competitive devaluation, printing money, QE etc... It all basically boils down to the same ethically wrong behaviour of Cheating the savers to pay for the imprudent behaviour of the over-spenders.

Unfortunately from the US to Europe to India, let's brace ourselves for the age of government sponsored inflation

DEBT Problems Continue... India in the picture now!

2011-06-18T15:32:00.000-07:00

Debt Ceiling in US has been reached. The political drama between the Republicans and Democracts continue. Too much of political gimmick has gone into it, I don't expect it to fundamentally alter the debt or borrowing profile - maybe some points scored.

In EURP, Rating agencies have given a real scare. Expecting that Greece will get the much needed relief in the short run now. But long term prospects for all of Eurozone are daunting. Countries in the Eurozone (and the US for that matter) may have noted the expression by the rating agencies. Anticipating that the rating agencies will now come under intense scrutiny in the medium term. After all, its not dictatorship, so you cannot 'order' things, but you can 'influence' the decision-making purposes to be optimized :).

In INDIA, interestingly no one is talking yet (at least openly) about the multiple debt monsters building up:
a) Air India : Has defaulted and been bailed out by Banks and OMCs.

b) OMCs : Will probably be bankrupt. Need to understand better how this is stacking up in the Union Budget (all Oil Bonds, Losses to Upstream and OMC companies), is this all on Govt Balance Sheet, or off the balance sheet item ( I infer this will be later, but just a conjecture yet will need to dig and confirm)

c) State Electricity Boards: This is the biggest ticking bomb of all. No one is openly mentioning it, but the kind of burden built up is almost asking for another bailout and amnesty. Either the SEBs will default or the banks loaning to them will have to declare significant NPAs.

Altough not mainstream, the Street has already built in the assumption of a 'technical default', where REC, PFC etc will have to rollover the bonds with lower NIMS and longer periods, perhaps also take a haircut on accumulated interest. Check the recent prices of REC, PFC (or the drops) and this seems to be built in. Interesting to see how this pans out

Debt problems in US and EURP

2011-05-31T12:02:00.000-07:00

In US, the Republicans and Democrats are sparring over the debt ceiling. Here is how I see this getting resolved:

There will be more bonds issued. A large chunk will be bought by China(It is almost completely caught in its own web now). Another substantial chunk by other emerging markets (read: The Arabs) and any unbought will be taken by the Fed, under QEx(X = 1,2, 2.5...., this is a more sophisticated way to say 'Printing Money')

In EURP, Germany, UK and France are battling Ireland, Greece against easing debt servicing terms and using more debt to pay existing debt. Here is how I see this getting resolved:

In the short run, There will be lot of hue and cry on getting stricter terms imposed on Greece, Ireland (and maybe Portugal and Spain). Further, bondholders will possibly do a very small haircut on their holdings - but a technical default will be avoided

In the longer run, There is no way the weaker countries can avoid the debt trap. In fact the stricter norms will force stronger decleration of their GDP and push them deeper in the trap - forcing either a default and/or being pushed out of the Eurozone to save other countries.

The easiest way out is to take the pain pill right now i.e. accept that the deficit is structural and default right now - let the bondholders take the pain. Market does have a very short memory :)
Though don't see that happening with the stance of EU & IMF

Bottomline for Equity Investment: Stay cautious on UK, Europe dependent consumption stocks.

Difficult time for Bulls on NIFTY and specifically RE stocks

2011-03-09T14:29:00.000-08:00

CY11 has all the makings for being a difficult year for Bulls:

1. Writing this blog on 9-Mar-11, Oil is still on boil with Brent around 116 USD/barrel and Libya seems headed for a civil war.

2. The FY12 budget has disguised an under-capitalized liability on subsidies (Oil, Fertilizer). Expect Debt ratios and CAD to be higher than projected

3. Affordability is going low - food prices worldwide still on a boil, at least a 10% food inflation on items I buy in the UK (Aubergines up from 70p to 87p, cucumber up from 70p to 85p, Diary Milk Chocs up from £2 to £3, Bread up from 60p to 72p, £1 pizzas only on bulk buy of 3 pizzas)

Expect affordability to go low, real estate prices to fall preceded by screeching halt to new buys culminating into indebted developers and project execution delays.
Don't trust research reports giving BUY signals, avoid RE like plague

NEUTRAL on Nifty, NEGATIVE on REAL ESTATE Stocks
On Nifty falling closer to 5000-5200 levels, a good opportunity to buy into quality stocks from a long term perspective. Buy on every 5% -10% dip from 5000-5200 levels.

PS: This is not financial advise, I have holdings in Nifty stocks

Crude Oil on a boil...

2011-03-02T13:03:00.000-08:00

Regime changes in Egypt, Tunisia.
Popular rebellion in Yemen, Bahrain, Libya..
Smoldering discontent in Oman, Saudi and Iran...
Commodity speculators in search of a killing to make from fear....
Brent @ USD 116/barrel, WTI Crude @ USD 101/barrel.....

Oil has been on a boil last few weeks. This post tried to measure the impact of Oil on Indian Economy sector-wise:

1] PRIVATE REFINERS: RELIANCE, CAIRN ENERGY, ESSAR OIL : Positive, GRM's will increase

2] PSU UPSTREAM, OMCs: -ve, OIL, GAIL, ONGC will lose 2 ways - increased subsidy burden, but no increase in realised profit due to fixed rate of Crude obtained from OMCs.

3] Indian IT: +ve, Higher Crude prices should cause a widening of CAD and currency depreciation which will improve margins (so long as developed markets don't slow down tech spending suddenly). +ve for INFOSYSTCH(INFY), WIPRO(WIT), TCS, (CTSH), HCLTECH etc

4] Financial Services: - ve, Higher crude will push up inflation necessiating interest rate hikes, impacting NIMs and affecting equity flows, hence the brokerage side of equity business. Higher GOI bond requirement will drive down yields impacting MTM values of held securities, Increase in NPAs

5] Infra: -ve, Rate hikes, rising cost of raw materials and labour cost spike (due to rise in basic living cost of workers) will impact margins and bankability of new projects

6] Telecom: NEUTRAL. Lower disposable income might imply drops in ARPUs and interest costs(most indian telecom companies are burdened with debt for n/w rollout and 3g). However, overall impact is much lower than other sectors. +ve on BHARTIARTL which has signficant non-India business

7] Metals Mining and Commodities: NEUTRAL, Speculating that metals cost will go up in tandem with Crude Oil, hence slightly +ve, however labour and RM , Transportation costs will go up significantly

8] TRAVEL, CARGO, TRANSPORTATION, LOGISTICS, HOSPITALITY: Big -ve as costs are largely in direct correlation to crude and competition is hugh, so scope for margin retention is low. Particularly -ve for airlines JETAIRWAYS, DECCANAIR, SPICEJET

9] REAL ESTATE & Construction: Costs to go up, landbanks already purchased at very expensive valuations in recent times. -ve for entire RE lot. DLF, UNITECH, HDIL etc and any other RE that I might have missed. Esp -ve where D/E is already high and company is not listed, awaiting favourable conditions for IPO

Basically, largely -ve. Time for India to launch NELP IX in a big way and try to benefit. For common investors, wait for a carnage and then invest when valuations are right

My current stock preference on a market correction:
(For the adventurous): Puts in early phase of the fall, CALLS when mkt is close to 4900-500

(For the common man i.e. me)
LnT, IRB From infra space for the long term
REC, SBIN, ICICIBANK from Financial Services
COALINDIA in Energy, (Buy ONGC on the FPO, hopefully with a further 5% retail discount)
As usual : No comments on the IT segment esp. Large Caps.

PS: These do not constitute financial advise. Please use your common sense before investing -> If I'd be rich advising on financial matters, I wouldn't be writing this for free.

PS2: Yes, I am heavily invested in the mentioned stocks

Consensus Estimates is not Common-Sense Estimate, is It?

2011-02-21T14:14:00.000-08:00

Saw a few reports on Consensus Estimates for Indian Markets by renowned bankers. With base case estimate running at 20% YoY earnings growth to 28% YoY earnings growth for FY11, FY12, FY13 - it just does not make sense.

Any competitive industry - and a company having decent scale with it - will probably grow 15-24% YoY. And with rising interest rates (falling volume growth and NIM's for banks), subsidies in Oil and Gas (losses for OMCs, profit reductions for upstream), stagnating real-estate (demand oustripping supply, rising EMI's, increasing inflation), infrstructure panting (rising inflation).... most sectors are up for negative revision in growth rates.

With all this in the picture, not able to fathom what is the consensus estimate made up of? - Either there is a lack of common sense in the creaters and audience of these reports or I seem to be on a different plane.

My growth estimates will probably be - Bull Case of 20% per annum for FY11-FY13, Base case of 16)% (which is still very optimistic) and a bear case of 12% growth.

Will probably come back and check in the next 12-18 months.
At present, Sensex looks overpriced and ripe for a correction if we do a global P/E of 12 month TTM or a FY12'Consensus' projections - operational risks are taken too much for granted.

Budget FY12

2011-02-21T13:52:00.000-08:00

Budget FY12:
From an economics point of view, here is what I expect should happen:

1. Strengthen FRBM and target 4.3% fiscal deficit ( since with overspend we will realistically achieve 4.5%)

2. Take steps to control current account deficit. Really little scope for increase exports. Idea should be to reduce import burden by promoting alternatives to imported oil:
a) Incentivise prospecting and stable governance for technology to get into India for Oil/Gas prospecting, discovery, production
b) DGH to incentivise shale gas production
c) Technology import to be incentivised (150% depreciation?), acquisition of oil field services companies abroad promoted
c) Gas/LNG imports, IPI pipeline, Coal Washeries by Oil India
d) Biofuel(though it has a downside on food prices)

3. Rein in speculation on perishable food, grains and metals. Strengthen PDS or at lesat take steps in that direction and set a policy framework (An agriculture minister saying non-foodgrains esp. vegetables are not as part of his department purview does not really help bring down prices, does it?)

4. Bring some fiscal responsibility to states, stop free SOPs - free electricity, fertilizer subsidy etc. Reform SEBs. Privatise quasi-governmental institutions used to subsidize and pay all subsidies from your own budget (includes ONGC, OIL, OMC's, SEB's)

5. Widen the tax net, include the current exclusions. Keep tax slabs unchanged at least for 5 years and create a policy to notify changes at least 2-3 years in advance

6. Too many too small banks, begin merger procedure. Strengthen 2-3 state-owned banks to achieve global Top 20 brackets

7. Spend on infrastructure (INVEST) - Power, Roads, Bridges, Ports, PDS. Not on sops (EXPENSE OUT) which only overheats the economy.

Given elections in states, here is what will probably happen:
1. Target 4.5% achieve 4.7% and then reduce by disinvesting wealth accretive units of the govt.

2. CAD un-touched, incentivise non-competitive industries which have better clout

3. GST Rollout delayed, a PDS policy framework which is so loosely defined that it is never implemented.

4. Pandering to popular sops - fertilizer subsidy, no change in diesel rates, subsidy on GAIL, ONGC etc(not so much on ONGC since govt. needs to divest)

5. No steps to include agriculture under the tax net

MKTS EXPENSIVE; HOLD

2010-05-29T18:12:00.000-07:00

Continuing on my previous post, markets still look expensive. So no new buy calls. HOLD on all current items held.

BOMBAY PROPERTY MKT for India.
SOVEREIGNS at an international level and
GOLD among commodities

look overvalued.

BOMBAY PROPERTY: Premium over other Tier-2 and Tier-3 towns has swelled, so also has prices increase over previous year. Volumes have obviously plummeted. Do not see the prices go down significantly but upside will be capped.

SOVEREIGNS: have inherited the risks of banks. Coupled with ageing population in the developed world and increasing social security costs. This might lead to downgrades of sovereigns. GREECE And SPAIN already underway.

GOLD: No real VALUE, no way to judge returns. No earnings, no dividends, not of heavy use in day-to-day activities e.g. STELL, COPPER, ALUMINIUM. Current prices driven by fear and greed. Upside if countries return back to gold standard. Otherwise a BEAR-CASE Scenario in short term.

RECMMONEDATION: Hold what you have, hedge across currencies and asset classes, keep whatever cash you have.NO NEW BUYS, unless you understand an industry well and are convinced of the prospects of a company within that industry.

Indian Markets: Overpriced. Only Buy in PSU Oil Counters

2010-03-22T15:07:00.000-07:00

1. Indian Markets seem overpriced for the near term, but strong liquidity inflows can provide cushion (for now).

2. The only key names in BUY Zone are Oil PSU counters.
In relative strength IOC > HPCL > BPCL
BPCL is most expensive, probably because of it's Mosambique oil find. However, it is also the most vulnerable due to higher relative component of LPG Cylinder sales. These will be most price inelastic.

So, BUY on IOC.
HOLD on anything else, no need to sell though.

3. BBL(Bharat Bijlee) looking interesting among mid-caps. Transformers should be a growth area with growth in power sector. Other +ve's: Strong dividend record, reasonably priced and embedded value of Siemens shares close to 20% of BBL value.

4. Refineries could be a +ve too, given rise in GRM's lately, but no research done yet.

Current Buys, Why we should not go by historical P/E

2009-03-30T15:50:00.001-07:00

Can never understand why plots like these are used to dupe people:

Though the fact that there are buying opportunities remain, the fact that historical P/E chart is not a good indicator seems common sensical to me.

If E keeps falling faster than or at the same rate as price, then P/E will be falling or constant even though your P is falling. This is exactly the situation we are facing.

P = R - C ( Profit = Revenue - Costs)

C = FC + VC (Costs = Fixed + Variable). Most companies have invested so much in fixed costs or in the process of investing that though R has come down, C continues to remain high , because either FC is high or they are in the midst of a capex cyle (or have completed it taking huge debts, which is why FC is very high again).

All RE companies, companies like Aban Lloyd, Tata Steel are prime examples.

There definitely is value in some of these companies, but what infuriates me is the use of the chart above which obviuosly is not conclusive.

My buys in the market:
a) Patni (NSE PATNI)( Cash in hand > Price per share + EPS is +ve historically and going forward)

b)ICICI Bank (NSE ICICIBANK)(Taken a hit, being valued at P/BV ratio much lower, oversold by FII's after Lehman mishap. I'd have loved to pair this trade by shorting HDFC which I think is being overestimated. Need to come back and check this hypothesis).

c) Balmer Lawrie and Balmer Lawrie Investments(NSE: BALMLAWRIE): PSU, so no scope for default, low P/E multiples, better visibility.Investment company at a further discount, so double the brownie points there.

d) Roman Tarmat(NSE ROMAN): I seem to like the company, smallish (so off-radar for most big investors who would'nt even bother report this company. Good cash-pile, low debt, good order book and a land bank thats not valued at all. Companies where land-bank is not valued and operational earnings justify P/E are my love.) Very little info. on this company though, would love to check if anyone has researched or tried to research this company.

e) L&T(NSE: LT) (Oversold and of all investors, I definitely back getting into Satyam fray, if not for acquiring, then at least to ascertain that BK Modi does not get this for pennies only to be sold off later).

Disclaimer: I own all 5 of these stocks, though only 1) and 2) have been added to the stock lately, others are historical buys. Waiting for cash accrual so that remaining can be bought :).

Real Estate: Long way to go down

2009-03-02T15:58:00.000-08:00

US Property markets have already crashed.
UK is not doing any good, here is a news clipping about London: http://www.propertywire.com/news/related-stories/hong-kong-expensive-office-property-200903012704.html

And Germany is next on the list of problems:
http://www.bloomberg.com/apps/news?pid=20601109&sid=a34Y6NVYrVyk&refer=home

Should Indian Real Estate be any different?
Some people may go by P/B or % of mkt value erosion to demonstrate that Real Estate sector is already bottoming out, but I believe there is still a long way to go down further.

Esp. places where both the developer and the flat buyers were highly leveraged.
e.g. South Bangalore (South of Silk Board, Bannerghatta Road, JP Nagar, Ejipura, Domlur), Chennai (Old Mahabalipuram), Hyderabad (Gachibowli and North , North West of it and the areas around Madhapur)

Especially

Disclaimer:
I hold DLF and DS Kulkarni among pure-play real estate stocks in India, more because of laziness than anything else. Its value has depreciated so much that I don't even bother sell what I have, hardly makes any difference.
Sold Akruti around 1000, Mahindra Gesco(Now Mahindra Life Space) around 500.

Not that any of the stock is better than the other.I think all are due correction, the higher the leverage the steeper the correction.

Analysis of US banks by an expert

2009-02-22T17:16:00.000-08:00

No analysis on my part for a week or two, will be on a kind of a sabbatical. But interesting analysis on the state of US banks from an expert:

http://www.moneymorning.com/2009/02/18/us-banks/

Circa 1930, part 2?

2009-02-09T15:35:00.000-08:00

The shadow of the 1929 depression and the ferocity of the current crisis, and its ability to snowball into something very similar. I had a post on this a few weeks back, a similar view echoed here:

BBC Link: http://news.bbc.co.uk/1/hi/uk_politics/7880189.stm

This crisis definitely has the capability of developing into a Depression, if left unchecked. The point worth seeing is whether central bank and government action worldwide actually steers us clear of this back into prosperity or actually worsen the situation.

Earlier link claiming this can snowball into a depression here:
http://equitideas.blogspot.com/2008/10/are-we-returning-to-1929.html

NIFTY surpises, buck global trend. Reliance to gain on courts order, loss for RNRL

2009-02-01T15:37:00.000-08:00

NIFTY(chart attached) did surprise me and quite amazingly bucked the global trend. Also proved wrong the prediction in the last post. However, the global trend is still very week and I want to stick out my neck over a break in the current rally and re-test of the lows closer to 2700.

Reliance (NSE: RIL) should post smart gains post the high court lifting its stay on sale of gas. Big -ve for RNRL.

NIFTY Trading Call: SELL

2009-01-29T17:43:00.001-08:00

I don't generally make trading calls, but this one looks like it. Nifty should be in free fall mode on 30-Jan.

This is possibly the worst that the world might have seen since 1929 and central banks around the world are trying to keep it that way, trying hard that it does not eclipse 1929 :-|, worrying times.

Some new snippets of parts of world in worst recession since 1929

http://www.bloomberg.com/apps/news?pid=20601087&sid=arLSvyBheETQ&refer=home [Japan]
http://news.scotsman.com/latestnews/Scottish---recession-.4924413.jp [UK]
http://news.bbc.co.uk/1/hi/world/europe/7726218.stm [Germany]
http://news.aol.co.uk/world-news/french-economy-enters-recession/article/20081003094554192310380 [France]
http://www.forbes.com/feeds/ap/2009/01/28/ap5977460.html [Spain]

So much for the bad news, the reason for the trading call is the screeching halt to the false relief rally stroked in the last 3 days. Began with US, Japan. should see impact in India today.

Well....

AFTEK

2009-01-26T15:30:00.000-08:00

Trying to check if the story of keeping cash out of term deposits is widespread.
AFTEK (NSE Code AFTEK) caught my attention.

The stock has hit a 52-week high of 72.80 and is currently closer to its 52-week low of 8.45. So what?
Times are recessionary, going is tough for mid-caps.

Here are my reasons[Data as of March'08 from www.moneycontrol.com :

1) Company has investments of 116.22 crores
2) Cash and bank balance of 299.52 crores
3) FD's of 40.31 crores
4) Debt of 79.17 crores

My questions are:

a) Why does the company need to keep around 300 crores in cash and bank balance, with only 40 crores in FD's?

b)March '08 EPS > Stock price, so effectively PE<1, what is the market discounting?

c) If I just value the cash /share ( March '08 has 9.3486 crore shares in issue), then cash per share > 30, but share price is only 8.

d) Inspite of such attractive valuations, no mutual fund investment in this stock in last 6 months (as per moneycontrol)

e) Promoter holding is just around 16-17%, why is there no attempt at an hostile takeover, whereas the cash/share itself is > share price + 100% premium.

Is something wrong with AFTEK's book or my understanding of their financial statements or is it just the SATYAM scare??javascript:void(0)? Time will tell...

My advice,
IF you are a very high risk investor, consider investing/shorting based on your reading of what could be the plausible cause.

If you are a moderate/low risk profile, avoid big-time...

SATYAM saga

2009-01-24T13:13:00.000-08:00

Ironic name for a company mired in financial fraud allegations, but the focus here is more on the inadequacy of some other organizations:

1. NASSCOM:
Supposedly the flag bearer of the Indian IT industry, and cannot protect a single member from losing its clients or employees. NASSCOM probably came out the weakest link in the saga. Acting just like the UN during international conflicts, but I would have expected NASSCOM to come out with
a) An actionable plan to salvage the firm
b) Strict NO on all members to poach clients (including projects of Satyam in clients where other members have incumbency)
c) Strict NO to poach Satyam employees
d) Provision of finance to cover Satyam's immediate expense
e) Strategic Administration at Board level and Operational Leadership so that business stays with Satyam
f) Aggressive pitch for Satyam with Global media, given that firm has value for clients, and its only the promoter that has misbehaved

Of course, NASSCOM did none of these, but kept issuing appeals. Maybe its just meant to host lunches, hold federation type talks and keep issuing public appeals. Thanks NASSCOM for clarifying your role.

2. ICAI:
Did'nt suspend PwC right away, Didn't suspend the participating partners pending a survey. Instead, came out with a statement that PwC is not liable if found guilty, the partners maybe.
Link here: http://www.cainindia.org/news/1_2009/action_against_partners_not_audit_firm_says_icai.html

My simple response to this with all due regards to the m(%&£$f%cking decorum is WTF!!!. This is as outrageous as anything I have heard/seen so far.
Were these guys signing in their own capacity or as PWC partners? For God's sake, either act and act assertively or confess that you are imbecile, incapable of action and will positively do everything to save the biggest names and successively reduce the net so that the smallest fish is caught.

BTW, how about issuing a statement that since the partners only signed the statement but did not conduct the audit, those who *actually* conducted the audit will be punished, and if research shows that the audit was never conducted, everyone can go back to their work as usual

3. Indian IT companies

I will reserve this for now, because this is not exactly the forum to use the expletives I'd want to.

But very simply put, toothless, shameless, spineless response by Indian IT companies. For every other company in the segment, its a clear signal that: 'if things go wrong with you, screw NASSCOM, screw the spirit of healthy competition. We are out there to screw you.'

I have a much larger list than this compilation ranging from Indian Government to AP Government to other regulating agencies and organization. But in terms of sins committed, I think these 3 overshadow Raju's sins.

Back in busines :)

2009-01-24T13:11:00.000-08:00

My apologies for being away from my blog for a long, long time. Settling in a new country, and more importantly getting connectivity and time to post did take some effort and time to come.

Will try to be more frequent from now on. Following immediately with the hot topics, Global Economics, Promoter manipulation in Satyam? :)