Smart Investor

Banking Sector - Book Profits

noreply@blogger.com (Raghav R) — Sun, 12 Feb 2012 17:22:00 +0000

Overseas investors seem to be on a selling spree when it comes to the Indian banking stocks, as they have pared their holdings in at least 28 public and private sector banks of the country in the past few months.
Various foreign investors have together sold banking stocks worth an estimated Rs 10,000 crore (over USD 2 billion) in about four-and-a-half months since October 2011.

While foreign investors have sold shares of at least 28 Indian banks, they have purchased fresh shares of only nine banking stocks during this period. The value of fresh banking shares purchased during this period is also much less at just about Rs 600 crore, as per an analysis of shareholding pattern and open-market transaction data available with stock exchanges.

The banks where foreign investors have pared their holdings include private players like ICICI Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank and DCB, as also public sector giants like SBI and Punjab National Bank. Those having seen an increase in the holding of overseas investors include HDFC Bank, South Indian Bank and IDBI Bank.

In one of the biggest share-sale transaction in the banking sector during this period, a unit of Singapore government's investment arm Temasek Holdings sold shares worth about Rs 1,500 crore in ICICI Bank on
Market analysts said the shares could have been sold to book profit after a sharp rally of about one-third in ICICI Bank shares since the beginning of 2012.

Indian banking and financial sector stocks have witnessed many share transactions in the recent past, given a sharp surge in their value since the beginning of 2012. While US-based Carlyle group sold shares worth about Rs 1,350 crore in HDFC on February 1, Warburg Pincus sold shares accounting for about 2.4 per cent stake in Kotak Mahindra Bank for about Rs 800 crore on the same day.

Besides, the shareholding pattern data for the October- December 2011 quarter shows that FIIs (Foreign Institutional Investors) lowered their holding in 26 banks. These included ICICI Bank, SBI, Axis Bank, DCB, Yes Bank, Allahabad Bank, Indian Bank, Corporation Bank, Bank of Baroda, Canara Bank, Dhanlaxmi Bank, Karnataka Bank, among others.

In fact, the banking sector witnessed the highest level of share sale by FIIs during that quarter. Also, a few like PNB, SBI, Syndicate Bank, Allahabad Bank and Central Bank have seen their FII holdings declining for four consecutive quarters now. On the other hand, the FII holding increased during the last quarter of calendar year 2011 in banks like South Indian Bank, Bank of India, City Union Bank, IDBI Bank, Indian Overseas Bank, Federal Bank, Andhra Bank, HDFC Bank and ING Vysya Bank.

Our Recommendation :
With most of the banking shares clocking decent gains of 30-50% gains, it is time to book profits and stay away from the sector as it faces stiff resistance at higher levels. Long term investors can however utilize steep falls to add banking scrips to their portfolio.

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BSE / NSE Weekly Review Feb 11, 2012

noreply@blogger.com (Raghav R) — Sun, 12 Feb 2012 02:52:00 +0000

Key benchmark indices rose in the week ended 11th February 2012, as inflows from foreign
institutional investors (FIIs) remained robust. This was the 6th consecutive weekly gain. Trading
remained upbeat throughout the week. However, some profit booking emerged on Friday (10
February 2012) after disappointing industrial production data for the month of December 2011
dampened investor sentiment.

Industrial production rose a slower-than-expected 1.8% in December 2011, government data
showed on Friday, 10 February 2011. The growth in December 2011 was sharply lower than
5.9% growth in November 2011. Manufacturing output, which constitutes about 76% of industrial
production, rose 1.8% from a year earlier, the federal statistics office said.

India's January exports rose 10.1% to $25.4 billion while imports rose 20.3% to $40.1 billion,
leaving a trade deficit of $14.7 billion, Trade Secretary Rahul Khullar said on Thursday. India's
exports reached $242.8 billion between April and January, Khullar said, citing provisional data.
The BSE Sensex rose 0.8% to 17,749 in the week ended Friday, 10th February 2012 while the
S&P CNX Nifty rose 1.1% to 5,382. The rise in the broader indices was amplified. The BSE MidCap index rose 3.3% to 6,247 while the BSE Small-Cap index rose 3.1% to 6,891. The sectoral
indices sentiments were extremely positive with the Healthcare index being the only loser. BSE
Realty, BSE CD and BSE Metal were the largest gainers.

Realty:
The BSE Realty index rose 5.8% to close at 1,887 levels. Among the heavyweights, DLF rose
marginally (0.2%) while Unitech and HDIL jumped significantly (12.9% and 18.0% respectively)
in the week. Shares in real estate companies were up on expectations of a pick-up in deal flows
and a fall in interest rates, which would benefit both builders and real estate buyers. Unitech
rose on account of pressure from the Norwegian government to survive Uninor, a venture by
Telenor and Unitech Ltd. Telenor, in which the Norwegian government has a ~54% stake, owns
nearly two-thirds of Uninor with infrastructure provider Unitech holding the rest. Norway’s IT
minister, Rigmor Aasrud, met her Indian counterpart, Kapil Sibal, to discuss the Supreme Court’s
cancellation of licenses of telecom operator Uninor.

Consumer Durables (CD):
The BSE CD index rose 5.8% to close at 6,169 levels. Among the heavyweights, Titan, Rajesh Exports and Gitanjali rose 5.3%, 2.4% and 5.5% respectively while Videocon fell 1.1%. TTK Prestige rose a whamming 38.9% in the week, establishing its spot among the large companies by market cap within the CD space. The company clarified that it did not intend to exit the modular kitchen business but plans to expand it slowly after gaining experience. The company also has a plant coming up in Gujarat, which will add to the topline significantly.

Metals:
The BSE Metals index rose 4.1% to close at 12,364 levels. All the industry majors were gainers. Tata Steel and Coal India rose 1.7% each while Jindal Steel, Hindalco and Sterlite rose 8.5%, 0.2% and 5.1% respectively. Tata Steel issued an encouraging future outlook after reporting 3rd quarter consolidated net loss of Rs 603 cr as against net profit of Rs 1003 cr in Q3FY11. Turnover rose 13.79% to Rs 33103 cr in Q3FY12 over Q3FY11. With regard to future outlook, Tata Steel said softening raw material prices is expected to ease product-costing pressures from Q4FY12 onwards. Tata Steel expects steel demand in India to improve with RBI indicating progrowth monetary policy. Steel prices remain firm and with traditionally strong volumes in the fourth quarter and the company's profitability is expected to improve.

The outlook for steel demand in Europe remains stable. Strengthening steel prices in Europe and restocking will result in better margins of Tata Steel’s European operations in the coming quarters. Tata Steel’s South East Asian operations are expected to perform better with activities in Thailand coming back to normal. Reconstruction activities will boost long products demand. Jindal Steel and Power plans to spend $300 million in developing new and existing mines in Africa. The move is part of the company's strategy to source coal assets abroad to meet raw material demand of its steel and power plants at home.

Bankex:
The BSE Bankex index rose 3.0% in the week to close at 11,987 levels. All the large players, namely ICICI Bank, HDFC Bank, SBI and Axis Bank, were gainers, rising 1.5%, 1.9%, 3.3% and 1.6% respectively. SBI recently said that the Government of India has agreed to inject approximately Rs 7900 crore into bank by way of preferential allotment of equity shares to help SBI achieve minimum 8% Tier I CAR by 31 March 2012. The government currently owns 59.40% of SBI. HDFC Bank hit a record high on Friday. A unit of Singapore state investment company Temasek Holdings Pte sold 1.59 crore shares of ICICI Bank through bulk deals on NSE for Rs 1472 crore during the week. Allamanda Investments Pte sold the shares in India's
largest private-sector lender by assets at an average Rs 924.05 per share in the week. Goldman Sachs Investments Mauritius mopped up 64.65 lakh shares in the bulk deal at a price of Rs 924 per share.

PSU:
The BSE PSU index rose 2.5% in the week to 7,673 levels. ONGC, Coal India, NTPC and SBI rose 0.3%, 1.7%, 2.0% and 3.3%. As mentioned previously, the Government of India has agreed to inject money into SBI. NTPC paid an interim dividend of Rs 2,885.92 cr for the current fiscal. Net profit of the company rose 10% to Rs 2,130.39 crore for the quarter ended December 31,
2011 due to increase in coal prices.

Healthcare (HC):
The BSE Healthcare (HC) index was the only loser in the week, falling 1.0% to close at 6,347. Among the giants, Sun Pharma, Dr. Reddy’s and Lupin were losers, falling 2.7%, 3.0% and 4.1% respectively while Cipla rose 1.2%. Lupin Limited is planning to invest $20 million in setting up a new manufacturing facility in Pune. Lupin will also launch a cancer drug, which is yet to go through the third clinical trial. It is expected to hit the market during the next financial year.

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Sterlite Industries - Buy on dips

noreply@blogger.com (Raghav R) — Wed, 08 Feb 2012 16:36:00 +0000

Sterlite Industries reported strong Q3FY12 results at the operating level with: (i) a strong copper business, and (ii) a fall in production cost at Balco, Vedanta Aluminium (VAL) and power business. After repeated increase in the cost of production at VAL and Balco, the company reported a decrease in cost of production with: (i) higher utilisation leading to efficiency realisation; (ii) lower alumina cost; and (iii) better coal availability lowering power costs. The company has indicated that VAL’s aluminium cost of production at $2,004/t (from $2,554/t in Q2FY12) and Balco’s cost of production at $1,880/t (from $2,399/t in Q2FY12) is sustainable at current levels. Sterlite Energy has also lowered the cost to R2.6/KWH down from R3/KWH in Q2FY12 on higher generation and better coal availability.

Sterlite’s investments in VAL remain high at R101.7 bn (R5.6 bn equity and R96.1 bn of loans) for its 29.5% stake in the company. As per our calculations, at D/E (debt/equity ratio) of 0.6, Sterlite has R66.9bn of surplus investment in VAL. The company has stated that VAL would be restructuring its capital structure in Q4FY12 and with that there would be more clarity on the surplus investments. We believe any clarity on this would be a key trigger for the stock.

Sterlite Energy has reported improvement in the number of units generated (1.5 bn units from 1.1 bn units in Q2FY12), with better coal supply and the commissioning of the third unit of 600MW during the quarter. Higher generation has also helped in realising operating efficiencies, which has lowered the cost of generation. While PLF (plant load factor) still remains sub-50% for the three units commissioned, there has been a gradual improvement. The company has said that the fourth unit of 600MW would be commissioned in Q4FY12—which should further improve operations. However, coal supply still remains a challenge and key impediment to its profitability.

The management indicated that 325ktpa aluminium smelter at Balco would be commissioned by Q2FY13 (a delay of six months from last guidance) and the first 300MW power plant would come on line by Q4FY12. However, the key to these projects would be coal availability and bauxite mine allocations. The company has obtained environmental clearance for its coal mine and now it would apply for forest clearance. This would take at the least one year.

Sterlite Industries reported R23.2bn of Ebitda ahead of our estimate of R22.3 bn. This is primarily on account of better-than-expected copper results and lower cost of production at aluminium operations. Despite better-than-expected operating profits, net profits at R9.14bn came in below our estimate of R10.54 bn, on account of forex losses of R4.2 bn. Please note that other income at R8.8 bn was also higher than our estimates and hence the disappointment was lower. Adjusted for the above one-offs, net profits were largely in line with our estimates.

Sterlite’s management has indicated that it is in discussions with the government of India for purchasing its remaining stakes in Balco (49%) and Hindustan Zinc (25%). Any clarity on this would be a positive, in our view, given it will release excess cash in HZ for better deployment.

We maintain our Buy on the stock on weak valuations and most of the problems being discounted in the stock price. While there are early signs of recovery, any progress on lower costs and clearances to coal mine/aluminium expansion would be a key trigger for the stock, in our view.

After hitting a 52 week low of Rs.86 Sterlite has recovered quite sharply and is now trading around Rs.125 levels. Utilize any major correction to buy around Rs.100 levels to add to your portfolio and hold for a target price of Rs.180 holding period of 6 months.

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HDFC Bank - Buy

noreply@blogger.com (Raghav R) — Wed, 08 Feb 2012 16:26:00 +0000

Braving macro headwinds

HDFC Bank reported earnings of R10.9 bn, a 34% year-on-year, partly driven by operating leverage. Topline was up 19% YoY, driven by a 20% loan growth and margins at 4.2% (flat YoY). Core fee grew 16% YoY. As expected, CASA (current account, savings account) was down +350 bps quarter-on-quarter at about 49%.

Loans grew by +20% YoY. Sequential loan growth is very strong (10% QoQ) partly driven by lending to oil companies and the Food Corporation of India. The pace of retail growth also continues to be strong at +28-29% YoY. The share of retail loans now stands at 48% vs 45% in Q1FY11, but down from 50% in Q4FY11.

Margins were down 10bps YoY, but were flat QoQ at 4.2%, despite a sharp rise in funding costs to +30-35bps QoQ. Fee income grew 16% YoY, +80-85% of fees is from retail.

HDFC reported an increase of 8% in gross NPLs (non-performing loans) QoQ, driven by (i) microfinance portfolio buyout related exposure and (ii) investment in preference shares where dividend is not paid out. However, adjusting for these, annualised slippages rate is <40-50 bps, flat QoQ. Overall, asset quality continues to remain very manageable with gross NPLs at 1% and net at 0.2%.

We have tweaked our earning estimates by <1% to factor in lower treasury gains. But, Q1 results did score high on quality (core operating parameters). We expect HDFC Bank to deliver about 30% earnings growth in FY12-13, as the bank benefits from rising distribution, liability franchise and economies of scale.

Despite macro headwinds, the bank has continued to deliver +30% earnings growth and manage asset quality. Hence, we believe the stock, trading at 23x FY12e earnings can continue to trade at least 20-21x FY13e earnings, if there is visibility of earnings growth sustaining at +30% and comfort on asset quality. We raise our price objective to R600, offering 18% upside potential.

Bank Nifty / Bankex Review - Buy on declines

noreply@blogger.com (Raghav R) — Tue, 07 Feb 2012 00:45:00 +0000

Top 5 Private Sector Banks - Buy on declines

We have done detailed analysis of the Q3 results of private sector bank and following is the summary of our Report.

One week returns

Bank Nifty 3.25%
HDFC 4.76
ICICI 2.96
Kotak 6.03
Axis 2.16
Yes 5.28

One month returns

Bank Nifty - 19.85%
HDFC 14%
ICICI 22.44%
Kotak 16.53%
Axis 26.50%
Yes 38.39%

3 months returns

Bank Nifty - 3.02%
HDFC 4.83%
ICICI 3.64%
Kotak 3.14%
Axis -2.50%
Yes 8.25%

Six Months returns

Bank Nifty - 2.12%
HDFC 6.95%
ICICI -6.01%
Kotak 18.85%
Axis -11.88%
Yes 13.08%

Our Recommendation - With Buy and Sell ranges given below

Bank Nifty

HDFC 475 - 540
ICICI 850 - 935
Kotak 450 - 550
Axis 950 - 1260
Yes 315 - 365

Look for a correction of about 8-10% and buy the above stocks on dips. The banking sector is likely to do well in the coming months and will support both the Nifty and Sensex to stay higher.

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Infiniti Retail plans to enter eastern region

noreply@blogger.com (Raghav R) — Mon, 06 Feb 2012 01:07:00 +0000

Business Line : Industry & Economy / Marketing : Infiniti Retail plans to enter eastern region

MUMBAI, FEB 5:

Tata Group firm Infiniti Retail, which operates consumer durables and electronics chain Croma, plans to enter the eastern parts of the country in the next fiscal and the first set of stores in the region will come up in Kolkata.

“At present we do not have presence in the eastern part.

Our focus for the next fiscal will be to enter the eastern region and to start with, we will be opening stores in Kolkata,” Infiniti Retail Managing Director and Chief Executive, Mr Ajit Joshi, told PTI.

The company plans to open six to eight stores in Kolkata.

“These will be opened in a phased manner, and our property team is working on identifying locations. Similarly, we are also looking at opening stores in Bhubaneshwar, Guwahati and Jamshedpur,” he said.

The company also plans to further penetrate where stores already exist. “We will be opening four stores in Hyderabad and Chennai and a few more in Bangalore. Besides, we also plan to open around three to four more stores in Mumbai, taking the total number of outlets in the city to 24.”

The firm has embarked on various initiatives to boost the sales of its private labels, including setting up of service centres and introduction of service stand-by products.

“Currently, we have two service centres, one each in Delhi and Bangalore. We plan to set up such centres across the country,” Mr Joshi said, adding that initially, these centres will provide after-sales services for its private labels.

“The demand for our products has grown and we expect to make Rs 120-140 crore in revenues from private labels this fiscal compared with Rs 80 crore last year. This initiative will increase confidence among customers about the genuineness of our products,” Mr Joshi said.

“We also plan to provide stand-by products temporarily to customers in case gadgets develop any problems. So, until the gadgets are repaired, the customers can use these stand-by products so they do not have to suffer any interruption of service,” he added.

Source - BusinessLine

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JSW Steel - Sell

noreply@blogger.com (Raghav R) — Sun, 29 Jan 2012 12:44:00 +0000

JSW Steel came out with its Q3 numbers on Friday and they show a decent performance in terms of volumes that rose by 20 per cent YoY. In the September quarter of 2011 the volumes were up by 19 per cent on a YoY basis. However, the volume scenario compared to the previous quarter remains the same as it grew only by 1 per cent whereas in the previous quarter the QoQ growth was by 10 per cent to 1.88 tonnes.

The net sales of the company stood at Rs 7,859.62 crore, higher by 35 per cent as compared to the previous year’s same quarter due to higher sales volume and flat realisation levels. The steel prices during the quarter remained flat as compared to Q2FY12. However, the operating performance of the company was a little disappointing. Its EBITDA on a QoQ basis declined by 3.36 per cent and grew by 25.2 per cent on a YoY basis to Rs 1,252 crore.

Meanwhile, the EBITDA margin continued to decline by 130 bps to 15.9 per cent due to higher coking coal cost and raw material cost which was by up by 46 per cent and 47 per cent respectively. Coking coal’s Australian FOB prices came down from USD 300 per tonne in September 2011 to USD 235 in December 2011. The gains, though, were negated by the higher rupee depreciation against the dollar.

About the present scenario the company has stated that the demand in India has remained modest in the last six months due to weak global demand coupled with higher interest rate and high inflation which led to delay in consumption and new capex plans. The world steel production fell significantly from a peak of 130 million tonnes in May 2011 to 115 million tonnes in November 2011. And in India the demand for steel grew by a mere 1.8 per cent from April to October. The company has further stated that the month of December has witnessed a rebound in demand.

Our Recommendation :

The scrip was hovering around Rs.560 levels on 9th January 2012 and has since jumped to Rs. 680 levels giving a decent return to existing shareholders. Investors should exit at the current price and re-enter on steep declines to Rs.500 levels.

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Stides Arcolab - Buy on declines

noreply@blogger.com (Raghav R) — Sun, 29 Jan 2012 12:22:00 +0000

Strides Arcolab, a Bangalore-headquartered pharma company has sold its subsidiary Ascent Pharmahealth at an enterprise value of AU$ 375 million (about Rs 1,968 crore) to Watson Pharmaceuticals. The company is currently going through a restructuring phase.

Strides had acquired a majority stake (50.1 per cent) in Australia-based Ascent Pharmahealth in August 2008. According to the news agency Reuters, this acquisition was valued at the price of AU$ 65 million (about Rs 260 crore). The company later had increased its shareholding up to 60.3 per cent.

Ascent is one of the leading generics company in Australia. This company also has nine subsidiaries in countries like New Zealand, Singapore, Hong Kong, Malaysia and Brunei. Ascent brought about 33 per cent of the revenues of Strides in CY2010. Ascent has grown by a healthy five-year compounded annual growth rate (CAGR) of 30 per cent in the topline. For the year 2010 the company reported sales of AU$ 132.3 million (about Rs 550 crore) while its net profit remained AU$ 12 million (about Rs 50 crore).

Its EBITDA margins remained at about 13 per cent, lower than the EBITDA margins of Strides (22 per cent) in the same year. For the year 2010 the company showed a growth rate of 26 per cent in topline and 30 per cent in the bottomline. This high growth has mainly arisen due to the high growth rates in the Australian pharma market.

The Australian government has proposed a cut of 23 per cent in the pharma product prices from April 2012. Though the company is leading player in the Australian generics market, we believe that this would impact the margins of Ascent.

Looking at the value that Strides has got for selling Ascent, we believe it will have a good impact on its balance-sheet. Its total debt as of June 2011 half-yearly result was Rs 2,419.51 crore. The company paid Rs 90 crore as half-yearly interest expense which works out to be Rs 180 crore of annual interest payment in 2011. Its interest cover ratio as per the same statement works out to be 2.15 which has decreased from 2.97 in the same period last year. Its debt to equity ratio stood at 0.74 in June 2011. In our opinion company will use the amount received from the Ascent deal to pay the debt and bring these ratios down.

The company recently has also said that it will mainly focus on the injectable and specialties segment in which it has recently received many USFDA approvals. As we see it, the company is in a very good shape to take the benefit of these approvals in the coming years. Strides’ specialties division, Agila, is also doing well. In 2010 its revenues rose by 84 per cent and contributed about 39 per cent to the topline and 32 per cent in the EBITDA.

Our Recommendation :
With the good price received for Ascent and many new products in the pipeline we believe that this stock will be an attractive bet going ahead. Investors could start looking to accumulate the stock during the dips.

Investors should buy the scrip on all declines to Rs.400 levels and target for a Rs.600 with a holding period of 12-15 months.

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BSE / NSE Weekly Review 20 Jan 2012

noreply@blogger.com (Raghav R) — Thu, 26 Jan 2012 08:19:00 +0000

High volatility is expected in a truncated week ahead as traders roll over positions in futures & options segment as the January F&O contracts expire on 25th January 2012. The stock markets will remain closed on 26th January 2012, on account of Republic Day.

The RBI is widely expected to keep its key lending rate viz. the repo rate steady at the Third Quarter Review of Monetary Policy, scheduled on 24th January 2012, as headline inflation remains high. Investors’ focus is on Q3 results as well. The Q3FY12 results are likely to be weak due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year.

Some of the companies declaring their results in the next week include L&T, Maruti Suzuki India, Sterlite Industries, Idea Cellular, GAIL and Kotak Mahindra Bank on 23rd January. Lupin, Cairn India, Grasim and Biocon on 24th January. Bank of Baroda, Sesa Goa, Union Bank of India, Rural Electrification orporation, Indian Hotels and Tata Communications on 25th January. Blue Star, NHPC, BHEL, NTPC, Bank of India and Canara Bank on 27th January

Indian Markets
Strong results from HDFC Bank, ITC, Bajaj Auto, Wipro, TCS, HCL Technologies and Hero MotoCorp, and sustained buying by foreign funds pushed key benchmark indices to their highest level in more than six weeks. The S&P CNX Nifty moved past the psychological 5,000 level. Firm global stocks underpinned sentiment. The market gained in four out of the five trading sessions during the week ended 20th January 2012. Foreign institutional investors (FIIs) bought shares worth Rs 4441.37 crore in eight trading sessions from 10 to 19 January 2012, as per provisional data from the stock exchanges.

The BSE Sensex rose 584.39 points or 3.62% to 16,739.01, its highest closing level since 7 December 2011. The S&P CNX Nifty gained 182.60 points or 3.75% to 5,048.60, its highest closing level since 7 December 2011. The BSE Mid-Cap index rose 1.75%

Strong results from HDFC Bank, ITC, Bajaj Auto, Wipro, TCS, HCL Technologies and Hero MotoCorp, and sustained buying by foreign funds pushed key benchmark indices to their highest level in more than six weeks. The 50-unit S&P CNX Nifty moved past the psychological 5,000 levels. Firm global stocks underpinned sentiment. The market gained in four out of the five trading sessions during the week ended Friday, 20th January 2012.

Gains in world stocks triggered by stronger-than-expected GDP growth in China, the world's second biggest economy, in the fourth quarter of 2011, strong Q2 December 2011 results from IT major HCL Technologies and data showing buying of Indian stocks by foreign funds over the past few days, triggered a rally on the domestic bourses.

Trading for the week began on a positive note. Key benchmark indices registered small gains to reach 5-1/2-week closing highs on Monday, 16 January 2012 as the headline inflation hit 2-year low. This reinforced expectations that the central bank could start cutting interest rates in the coming months to revive slowing economic growth. The BSE Sensex rose 3.62% to 16,739.01and The S&P CNX Nifty gained 3.75% to 5,048.60, its highest closing level since 7 December 2011. The BSE Mid-Cap index rose 1.75% and the BSE Small-Cap index gained 1.71%. Both these indices under performed the Sensex.

Realty:
The BSE Realty index rose 7.97% to close at 1708 levels. Among the heavyweights, Unitech, DLF, Oberoi Realty and HDIL gained 11.9%, 8.8% 8.7% and 8.3% respectively. India's largest realty firm by net profit DLF rose 8.8%. The company is reportedly planning to sell a convention centre project in Delhi and its wind power business for about Rs 1800 crore early next fiscal to reduce debt.

Metals:
The BSE Metals index rose 4.10% to close at 11198 levels. All the industry majors were gainers. Hindaclo, Jindal Steel, Tata Steel and Coal India rose 7.7%, 6.4%, 5.0%, and 0.1% respectively.Metal stocks rose as data showing China's manufacturing gauge remaining in contraction mode in January 2012, boosted case for monetary policy easing in the world's second largest economy. Tata Steel rose 5.0%. The company secured a major contract from Siemens Wind Power to supply 25,000 tonnes of high-quality profiled steel plate for wind towers.

Oil & Gas:
The BSE Oil & Gas index rose 6.4% to close at 8325 levels. Among the heavyweights, Reliance, ONGC and Cairn India gained 8.4%, 5.9%, and 2.8% respectively. Reliance Industries jumped 8.4%. The stock surged after company said its board will consider a proposal for buyback of equity shares along with Q3 December 2011 earnings on Friday, 20th January 2012. The last buyback program by RIL was done in the year 2004. Then, the company could only deploy around 5% of its planned purchase as the stock price had zoomed quite high.

Capital Goods:
The BSE Capital Goods index rose 5.49% to close at 9807 levels. Among the heavyweights, L&T, Siemens, and Bhel gained 8.6%, 4.1% and 2.6% respectively. Capital goods stocks rose on bargain hunting after a steep decline last month. India's largest power equipment maker by sales BHEL gained 2.6%. The company unveils its Q3 results on 27th January 2012. Larsen and Toubro is likely to register a 10% growth in sales from its automation business in the next financial year

Bankex:
The BSE Bankex index rose 5.9% in the week to close at 10912 levels. All the large players, namely SBI, Axis Bank, ICICI Bank, and HDFC Bank were gainers, gaining 8.7%, 7.3%, 6.7% and 4.1% respectively. Interest rate sensitive banking stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. HDFC reported 31.4% growth in net profit to Rs 1429.70 crore on 35.6% increase in total income to Rs 8622.64 crore in Q3 December 2011 over Q3 December 2010. Bank said its asset quality remains healthy. The bank's capital adequacy ratio (CAR) remained strong at 16.3% as on 31 December 2011, against he regulatory minimum of 9%

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VIP Industries - Buy

noreply@blogger.com (Raghav R) — Fri, 20 Jan 2012 00:53:00 +0000

We recommend a buy in the stock of VIP Industries from a short-term perspective. It is evident from the charts of the stock that following a steep decline from its life-time high of Rs 204 marked in September 2011, the stock found support around Rs 74 in December 2011. But, it subsequently changed its direction triggered by positive divergence in daily relative strength index and its weekly indicators reaching oversold territory.

Since December trough of Rs 74, the stock has been on a short-term uptrend. While trending higher, it breached its 21-day moving average. On January 12, the stock jumped nine per cent penetrating its immediate resistance at Rs 88. Further, it has advanced 4.6 per cent, strengthening its uptrend on Wednesday. The stock's short-term uptrend is backed with good volume during advance sessions.

The daily RSI is on the brink of entering into the bullish zone from the neutral region and weekly RSI is about to enter into the neutral region from the bearish zone. The daily moving average convergence divergence indicator is moving in line with the stock price, supporting the uptrend. Also, daily price rate of change indicator is hovering in the positive terrain implying buying interest.

We are bullish on the stock from a short-term perspective. We anticipate the stock to trend higher and reach our price target of Rs 101.5 or Rs 104 in the ensuing trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 95.

Our Recommendation :

The stock has spiked recently from levels of Rs.85 to 110 in a short span and might even look to cross Rs.120. Existing traders should exit the stock above Rs.120 and buy on steep declines to 95 levels.

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10 Stocks for 2012

noreply@blogger.com (Raghav R) — Sat, 31 Dec 2011 03:12:00 +0000

Unicon Investment has come out with its top 10 stock picks for new year 2012.

Company Name	CMP	Target Price
State Bank of India	1627	1949
Yes Bank	239	345
Coal India	299	350
Jindal Steel & Power Ltd	465	550
Bharat Heavy Electricals	237	290
Larsen and Toubro	1001	1250
Opto Circuits India	203	330
Mundra Port	123	136
Eros International Media	200	300
United Phosphorous	126	192

Losers 2011 - Avoid for 2012

noreply@blogger.com (Raghav R) — Sun, 25 Dec 2011 02:32:00 +0000

India's largest microfinance company, a leading private sector power producer and the world's leading exporter of cut roses share a common trait. These were some of the companies that saw their stock prices pummelled by 80-85 per cent in 2011.

The top losers of 2011 show that it wasn't sector or market cap preferences that swayed stocks. Instead, instances such as SKS Microfinance, Lanco Infratech and Karuturi Global showcase how unforgiving markets have been with companies with high debt, regulatory hurdles or even a whiff of ‘governance issues'. The 10 biggest losers in the CNX 500 index lost a whopping 79-92 per cent in value while the index shed 24 per cent.

De rated

A dispute within its top management and tighter regulation flagged off the de-rating of SKS Microfinance that saw its price-earnings multiple fall from 20 times to barely 7 times over a year.

A lawsuit impacting its Australian acquisition, interrupted gas supply for a project and debt worries proved to be the undoing of Lanco Infratech, now trading below its book value.

In the case of Karuturi Global, ambitious plans to diversify into Ethiopia ran into rough weather. Stocks of DB Realty and Unitech shed 70-75 per cent, as promoter group companies faced investigations related to the 2G scam.

As interest rates climbed steadily upward, companies with high debt on their books such as GTL and GTL Infra, 3i Infotech and Patel Engineering lost 75-92 per cent.

No Hope

With stock prices of these companies taking such a big tumble, should investors average their positions at these prices? They shouldn't, say market participants. In fact, they hold the view that some of the worst performers this year may have suffered a permanent de-rating.

Retail investors, feels Mr Chokkalingam, Group CIO, Centrum Wealth Management, usually do not have required courage to book losses. But he advises shifting to stocks of companies which are cash-rich, offering good dividend yields and earnings record.

Mr Rikesh Parikh, Vice-President – Equities at Motilal Oswal Securities, says that even if broader markets do recover and move to higher levels, these stocks may not get back to their highs.

Our Recommendation :

Avoid these stocks for 2012 as the out look for many of these scrips is pretty negative. Any decent spike in these should be utilized as a shorting oppurtinity with strict Stop Loss.

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Winners of 2011 - Stay Invested

noreply@blogger.com (Raghav R) — Fri, 23 Dec 2011 02:01:00 +0000

Even though most frontline stocks are still struggling to recover lost ground, 24 stocks in the BS 200 list have given positive returns at a time the Bombay Stock Exchange benchmark, Sensex, has tumbled 24.5 per cent, or over 5,000 points, to 15,491 till December 16.

For example, Bajaj Auto is up eight per cent even though all the other automobile stocks in BS 200 reported a decline ranging 3-34 per cent. Similar is the story across other sectors such as telecom, pharma, FMCG, banking and so on.

Kitchen appliances maker TTK Prestige has gained the most so far in 2011. The company has reported a healthy 56 per cent year-on-year growth in net profit of Rs 59.05 crore for the six months ended September, a trend also seen in the past. TTK has reported a compounded annual growth rate of 20 per cent in revenues and 50 per cent in profit after tax in the past decade. Crisil Research has assigned it a fundamental grade of ‘5/5’, indicating excellent fundamentals.

Among other big gainers, Gujarat Flurochemicals appreciated 61 per cent during this period. The company, engaged in the industrial gases business, had reported an almost fourfold jump in net profit at Rs 348 crore for the six months ended September on the back of higher income from operations, which got a boost from certified emission reductions (carbon credits). It had reported a net profit of Rs 264 crore in the entire previous year ended March 2010.

Consumption plays shine
If you had bet on consumption-related or so-called defensive stocks such as Bata India, Gitanjali Gems, TTK Prestige and Petronet LNG, given the weakening market conditions in 2011, it would have yielded a return in the range of 28-62 per cent.

However, according to market analysts, the valuations for consumer staples are not cheap any more, post the recent outperformance. They say part of the rush for these “safe haven” companies is driven by volatility in the markets.

Foreign institutional investors have also shown interest in consumption and defensive stocks during the year, data show.

The fast-moving consumer goods (FMCG) sector, considered a defensive bet in volatile times, has outperformed the market by giving an average nine per cent return, while pharma and information technology (IT) have restricted losses to sub-16 per cent each.

Hindustan Lever, Colgate-Palmolive and ITC in the FMCG space appreciated between 12 and 26 per cent each and figure among the top 15 gainers. The question is what is the outlook for such stocks? The verdict is not unilateral.

“FMCG and pharmaceutical companies have done well in the past despite macroeconomic headwinds. I believe the consumption story has not been overdone and stocks from these sectors will continue to do well,” said Saurabh Mukherjea, head of equities, Ambit Capital.

However, other analysts expect some cooling off in the consumption theme, given the rupee-dollar equation and inflation levels. Says T P Raman, Managing Director, Sundaram Mutual, “I believe consumption may cool off a bit going ahead, though not in the immediate near term.”

Cementing gains
UltraTech Cement, ACC and Ambuja Cements each gained about five per cent during the period, and figure among the top 25 gainers. The stocks outperformed as cement prices remained north-bound during the year. The average retail prices of cement increased about three per cent in November 2011 month-on-month to Rs 289 a bag and almost 17 per cent year-on-year.

“Cement demand will continue to gain traction during the remainder of 2011-12. However, in the light of the steep rise in prices over the past nine months, the tempo of price increase is likely to slow,” said Ajay D’Souza, head, Crisil Research.

Some experts, though, are cautious on the sector. Points out Ambareesh Baliga, Chief Operating Officer, Way2-Wealth, “With the demand for cement likely to remain under pressure going ahead, the stocks are also expected to remain subdued.”

On the whole, given that uncertainties and concerns still continue, it will be some time before things start looking up. Baliga says, “Overall, we advise investors to stay away from the equity markets in the current market conditions.”

Our Recommendation -

Stay invested in above shares and keep adding them to your portfolio as we feel that they are likely to out perform in 2012 too.

Wishing All our Readers a Very Happy & Bullish New Year !!! May be your dream of building Wealth come true.

Momentum Stocks - What Next ??

noreply@blogger.com (Raghav R) — Sat, 17 Dec 2011 03:31:00 +0000

Billionaire investor Rakesh Jhunjhunwala, whose long-term bets have earned him popular titles such as 'the big bull', now faces a lot of red in his portfolio.

Since December 1, as the market benchmark declined 6%, stocks that Jhunjhunwala owns have lost up to 30%. VIP Industries, a big chunk of the billionaire's portfolio, led the list with the maximum notional loss of 30.5%.

Other losers include Provogue India, Subex andReliance Broadcast Network, Aptech and Delta Corp, all of which are down 16-25%. Broadly, Jhunjhunwala's entire portfolio is in the red, with 25 out of 28 stocks analysed by ET recording a decline in December.

The other three counters include Sterling Holiday Resorts, which is up 3%, and Autoline Industries, up 22%. However, among those caught in the red are stocks that analysts believe have good fundamentals, and have been facing undue pressure due to the 'Rakesh phenomenon'.

Reportedly, the investor has been selling his positions recently to cover for losses from loss-making silver trades. In a nervous market, any news of such a sell-off triggers a much broader sell-off from the investor's many followers.

In a response to ET last month, Jhunjhunwala rubbished the claims and said, "People can say anything they want, I have no comments. I never talk about my trading bets."

One stock caught in the crossfire of rumours is Lupin, in which the billionaire holds around 2%. Since December 1, the pharmaceutical company's shares have lost 7.6% and are trading around Rs 430.

"Here is a huge sentimental overhang on the stock. However, weakness in the stock should be seen as a buying opportunity," Sarabjit Kaur Nangra, vice president of research at Angel Broking said.

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Sell - Dhanlakshmi Bank

noreply@blogger.com (Raghav R) — Tue, 29 Nov 2011 01:48:00 +0000

Rating agency Fitch Ratings has revised Dhanlaxmi Bank’s outlook to ‘stable’ from ‘positive’. The outlook revision reflects expectations that structural challenges faced by the bank from aggressive expansion in recent years are unlikely to improve its overall credit profile in the short to medium-term. Since FY09 (end-March 2009), the bank’s operating performance has been impacted by substantial loan growth, which is being increasingly funded through wholesale deposits and from large investments in infrastructure and other resources.

The bank has increased its branch network by 40% and headcount by three times since FY08. Amid low net interest margins and a significantly high operating cost base, profitability remains weak.
Dhanlaxmi Bank’s asset quality has remained stable so far, with a gross non-performing asset ratio of 0.55% and a net NPA ratio of 0.17% as on end-September 2011. However, the moderating economic growth and high interest rate environment may impact its loan portfolio, a large part of which is not seasoned.

The bank expects to grow at a slower rate in the current financial year after the aggressive 81% loan growth in FY11. However, its capitalization is weakening (Tier I ratio: 8.73% in H1 2011-12, against 9.41% in 2010-11) from low internal capital generation, while raising fresh common equity is difficult in the current equity market environment.

The bank’s net profit for the quarter jumped by 168.51% at Rs 4.35 crore as compared to Rs 1.62 crore for the quarter ended September 30, 2010. Total income has increased by 79.11% to Rs. 410.53 crore for the quarter under review from Rs 229.20 crore for the similar quarter of the previous year.
The bank’s gross non-performing asset ratio improved 71 basis points to 0.55% aided by strong recovery in bad loans. The absolute amount of net non-performing assets also narrowed to Rs 17.5 crore as of September-end from Rs 50.4 crore a year ago.

Our Recommendation :

The scrip has been under cloud for some time. Inspite of a big rally witnessed in the banking sector stocks on 28th Nov, this scrip has been a laggard jumping by a measly 3.5%

Traders can short the scrip today with a strict stop loss of Rs.58 for a target of 53 for the day.

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Gainers & Losers BSE , NSE Week ending 25 Nov 2011

noreply@blogger.com (Raghav R) — Sun, 27 Nov 2011 13:52:00 +0000

Sensex top gainers:

The top gainers in the Sensex were L&T (up 1.7%), Maruti Suzuki (up 1%), Tata Motors Ltd (up 0.9%) and Cipla (up 0.6%)

Sensex Top losers:

The top losers in the Sensex were Reliance Capital (down 9.9%), Hindalco Inds (down 8.2%), Hero Moto Corp (down 7.2%), ICICI Bank (down 6.7%) and Reliance Inds (down 6.7%),

BSE IT Index (down 1.7%):

The largest losers in IT sector were TCS (down 2.6%), Infosys (down 2.5%), Sasken Comm (down 2.4%), HCL Tech (down 1.7%) and Mphasis (down 1.1%),

BSE Healthcare Index (up 0.6%):

The biggest gainers in Pharma were Morepen Labs (up 3.2%), Dishman Pharma (up 3.2%), Ranbaxy Labs (up 2.7%), Ipca Labs (up 2.6%) and Orchid Chem (up 2.5%), The top losers in Pharma were Natco Pharma (down 4.8%), Strides Arcolab (down 2.6%), Dr Reddy's Labs (down 2.5%), Sun Pharma (down 2%) and Astrazeneca Pharma (down 1.6%),

BSE Banking Index (down 4.1%):

The notable gainers in the banking space were Union Bank of India (up 5.6%), Karnataka Bank (up 2.7%), Yes Bank (up 1.4%), Bank of Baroda (up 1.3%) and PNB (up 0.4%). The top losers in the banking space were ICICI Bank (down 6.7%), Federal Bank (down 6.6%), Hdfc Bank (down 6%), Kotak Mahindra Bank (down 5.9%) and Andhra Bank (down 4.9%).

The BSE Auto Index (down 0.8%):

The top gainers in the auto space were Maruti Suzuki (up 1%) and Tata Motors Ltd (up 0.9%). The top losers in the auto space were Hero MotoCorp (down 7.2%), Swaraj Mazda (down 5.5%), M&M (down 4.3%), Bajaj Auto (down 3.1%) and Hindustan Motors (down 2.4%),

The BSE Oil & Gas Index (down 3.2%):

The top losers in the oil & gas space were Hindustan Oil Exp (down 11.7%), GSPL (down 8%), Great Offshore (down 7.3%), Gujarat NRE Coke (down 7.3%) and Chennai Petro (down 7%). The largest gainers were MRPL (up 4%), BPCL (up 3.1%), IOC (up 1.3%), Essar Oil (up 0.9%) and HPCL (up 0.3%).

The BSE Capital Goods Index (down 10%):

The top gainers in the Capital Goods space were Greaves Cotton (up 3.8%), Dredging Corp (up 2.8%), L&T (up 1.7%), Astra Microwave (up 1.3%) and Thermax (up 0.2%). The top losers in the Capital Goods were LMW (down 8.2%), Gammon India (down 6.8%), Jyoti Structures (down 6.7%), SKF India (down 6.4%) and Alstom Projects (down 6.2%).

The Cement Sector:

The top gainers in the cement sector were Shree Cement (up 1.9%).

The Telecom Sector:

The top gainers in the telecom space were Gemini Comm (up 10.8%), Shyam Telecom (up 3.4%) and Tata Communications (up 0.1%). The top losers in the telecom were Tata Teleservices (down 6.7%), Bharti Airtel (down 5.6%), RCOM (down 4.9%) and Idea Cellular (down 3.2%).

The Realty Sector (down 3%):

The top gainers in the real estate space were Peninsula Land (up 2.3%), Unitech (up 1.1%) and Sobha Developers (up 0.1%). The top losers were Parsvnath Developers (down 41%), HDIL (down 10.9%), Ansal Properties (down 10.4%), Mahindra Lifespace (down 3.7%) and Anant Raj (down 2.4%).

The Metals sector (down 3.8%):

The top losers in the metals sector were SAIL (down 12.9%), Jindal Steel (down 9.2%), JSW Steel (down 9%), Lloyds Metals (down 7.6%) and Sunflag Iron (down 6%).

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FIIs - Reduced exposure on BSE Sensex in July - Sept 2011

noreply@blogger.com (Raghav R) — Sun, 27 Nov 2011 12:54:00 +0000

Overseas investors have scaled down their exposure in 19 Sensex companies, including RIL, Tata Motors and SBI, during the second quarter amid rising concerns of economic slowdown and weakening of the rupee.

Out of the 30-Sensex firms, 19 companies have witnessed a decline in their respective Foreign Institutional Investors (FIIs) holding, while in the remaining 11 stocks, foreign fund house have consolidated their stakes during the July-September quarter of current fiscal compared to preceding (April—June) quarter, according to data available with the BSE.

However, FIIs have increased their stakes marginally in 16 Sensex firms during the June quarter this fiscal and reduced exposure in the remaining 14 companies.

Market analysts attributed the decline in FII holding to challenging macro economic conditions and weakening rupee. “FIIs are shying away from the Indian firms on concerns of macro economic conditions and depreciating rupee,” said Mr Kishor Ostwal, CMD, CNI Research.

Metal companies such as Hindalco Industries, Tata Steel and Jindal Steel & Power Ltd (JSPL), country’s largest lender State Bank of India (SBI) and drug firm Cipla have witnessed maximum reduction in their FII holdings.

In contrast, FIIs increased their holding in auto stocks such as Mahindra & Mahindra, Maruti Suzuki, Hero MotorCorp and Bajaj Auto. However, Tata Motors was an exception to this category.

The FII holding in Hindalco Industries fell from 30.83 per cent to 28.24 per cent at the end of the July-September quarter and during the same period, FII shareholding in Tata Steel declined from 17.06 per cent to 14.61 per cent.

In addition, foreign fund houses stake in JSPL fell from 23.03 per cent to 21.88 per cent. Besides, SBI has seen a plunge of overseas investors stake by 2.23 percentage points to 8.65 per cent during the second quarter of financial year 2010—11.

Pharma major Cipla saw a fall of 1.16 percentage points to 13.57 per cent and FII stake in Tata Motors dropped by 1.1 percentage points to 21.88 per cent.

On the other hand, overseas investors have consolidated their stake in Mahindra & Mahindra by 2.8 percentage points Hero MotoCorp by 1.13 percentage points, Maruti Suzuki by 0.54 percentage points and Bajaj Auto by 0.13 percentage points.

FIIs shed its holding in country’s most valued firm Reliance Industries by marginally 0.05 percentage points to 17.32 per cent in the second quarter of current fiscal.

Mirroring the volatility in the global economy, FIIs were not very consistent while investing in the Indian market. In July, they invested a hefty sum of Rs 8,030.10 crore in the equity market and again infused Rs 485.40 crore in August. In September, they pulled out Rs 158.30 crore, according to the data of the stock market regulator Sebi.

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Pledged Companies - Avoid

noreply@blogger.com (Raghav R) — Fri, 25 Nov 2011 03:11:00 +0000

MUMBAI: Pledged shares continue to hang like a sword over the stock market. According to the latest data, promoters of about 376 companies, out of the listed 1,214, with market capitalisation in excess of Rs 100 crore, have pledged their shares to raise funds.

Total promoter pledge positions in terms of value touches Rs 1.1 lakh crore as on mid-November, said a Crisil Research note.

In as many as 14 companies, promoters have pledged 90% plus of their holding, thereby exposing the companies to the risk of losing promoter control and also higher share-price volatility if the prices fall from its current levels.

Over 100 companies have pledged 50% of their owners' equity as lien, while promoters of 183 companies have placed 25% or more of their shareholding as lien. Companies in power, IT & ITeS, infrastructure and pharma sectors have seen higher levels of pledging, the Crisil note said.

"Markets have been volatile due to concerns of high domestic inflation, rising interest rates and tepid global economic environment. These concerns have triggered a fall in the stock prices, creating pressure on promoters who have pledged shares to make good the loss in the value of the collateral," said Mukesh Agarwal, senior director, Crisil Research.

According to brokers, investment in companies with higher promoter pledge exposes investors to severe price volatility. About half of the 300-odd mid-cap companies on BSE have fallen in the range of 20-85% over the past one year.

The trend is even worse in the small-cap segment where over 375 of the 500-odd actively-traded stocks have declined in the range of 20-95% in a year's time. With funding costs remaining high, promoters who have pledged their holdings will not be in a position to cough up money or more shares to prevent lenders from dumping the shares. This will lead to a further fall in prices.

As per reports put out by leading brokerages, promoters of companies like Ganesh Benzoplast, Spentex Industries, XL Energy, Gujarat Pipavav Port and Tata Coffee have pledged their entire shareholding to raise funds.

SpiceJet, Gujarat NRE Coke, United Spirits, Gati, Gayatri Projects, Raj Oil Mills, Birla Power Solutions, GTL, Koutons Retail, Western India Shipyard and Edserve Softsystems, among others, are companies where its promoter groups have pledged 85-99% of their equity. Almost all these stocks have fallen 5-45% since the beginning of November.

"Promoters of large corporates may be able to withstand margin pressures associated with pledged shares. Mid- and small-cap companies may find it extremely difficult in the scenario of a collapse of share prices and eventual trigger of margin calls," said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities.

According to Krishnakumar Karwa, managing director of Emkay Global Securities, financiers have started selling shares that are being held as collateral. "Volumes in mid-cap counters have come off sharply over the past few months. Every sell order at lower prices is causing stocks to correct deep. The sell-off has been aggravated because of margin calls," Karwa said.

Our Recommendation :

As the market has decisively turned negative investors should avoid these shares which are more vulnerable to wild fluctuations. The lenders will look at best price to exit in case of deep cuts.

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IT Stocks - beneficiary of $ appreciation

noreply@blogger.com (Raghav R) — Wed, 23 Nov 2011 02:34:00 +0000

Information technology (IT) stocks, which had underperformed the broader markets until mid-September, are now back in favour. Since 12 September, the CNX IT index of the National Stock Exchange has outperformed the benchmark Nifty by nearly 20%, more than making up for its underperformance earlier in the year.

Needless to say, this is because of the sharp depreciation of the rupee since August. It closed at 52.73 against the dollar on Tuesday, nearly 20% higher compared with levels of around 44 in early August.

According to an analyst with a foreign brokerage firm, every Rs. 1 increase in the rupee to dollar rate leads to an increase of around 3.5% in earnings for Infosys Ltd. The increase in earnings will be lower for firms such as Tata Consultancy Services Ltd, since they have hedged to a much higher extent. Even if one were to assume that the rupee to dollar rate in the medium term will average 50, this will lead to an over 20% increase in earnings estimates for Infosys compared with August.

Besides, the sharp rise in the rupee will provide a large margin buffer for IT companies, which will not only offset the pressure of wage inflation, but also companies’ leeway to spend more on sales and marketing to generate demand.

This is a welcome relief for companies in the sector as well as investors. In fact, a number of importer firms as well as companies with unhedged foreign currency borrowings are reeling under the pressure of a falling rupee. Given the widening trade deficit and the drop in portfolio and capital flows into the country, the fall in the rupee is expected to continue. In this backdrop, IT stocks may continue to outperform the broader markets.

Of course, the rise will be limited, given the weakening global macroeconomic situation. Infosys’ chief financial officer said on Monday that the company may miss the upper-end of its sales target for the December quarter and the fiscal year because of a deterioration in the global economic environment.

Even so, IT firms seem much better placed compared with firms catering to the domestic economy, which are grappling with high inflation, high interest rates as well as the impact of a declining rupee on their imports and borrowings.

Our Advise

Large Caps - Build your portfolio - hold long term

Infosys - Monthly High Rs.2875 and Low of Rs.2487 - Buy around 2500 on dips
HCL Tech - Monthly High Rs.380 and Low of Rs.450 - Buy around 400 on dips
Wipro - Monthly High Rs.387 and Low of Rs.327 - Buy around 350 on dips
TCS - Monthly High Rs.1040 and Low of Rs.1132 - Buy around 1060 on dips
Tech Mahindra - Monthly High Rs.640 and Low of Rs.543 - Buy around 550 on dips

Small Caps - Purely Trading bets - hold short term

Onmobile Monthly High Rs.640 and Low of Rs.543 - Buy around 550 on dips
Educomp Monthly High Rs.280 and Low of Rs.175 - Buy around 170 on dips
Mahindra Satyam Monthly High Rs.76 and Low of Rs.64 - Buy around 65 on dips
Mindtree Monthly High Rs.380 and Low of Rs.420 - Buy around 400 on dips
Patni Monthly High Rs.444 and Low of Rs.343 - Buy around 380 on dips

Source Livemint.com

BSE / NSE Weekly Review 18 Nov 2011

noreply@blogger.com (Raghav R) — Mon, 21 Nov 2011 00:38:00 +0000

Bear Attack
The week gone by saw the markets witnessing heavy selling pressure. All the five trading sessions saw the Sensex/Nifty ending in the red. An intra day recovery on Friday from the lows of the day helped to curb the losses. W-o-W, while the Sensex lost 4.64%, the Nifty lost 5.09% over the same period.

Reflecting the weak sentiments seen during the week, market breadth was negative in all the five trading sessions of the week.

Key Events
Global Markets
Initial jobless claims in the USA came in lower than expected at 388,000 for the week ending Nov. 12. The latest week's numbers eased from 390,000 from the week prior and were the lowest since April.

The number of housing building permits in USA jumped to a seasonally adjusted annual rate of 653,000 in October, up 10.9% from the revised rate of 589,000 in September, the Commerce Department said Thursday. That was much higher than expected, with economists surveyed by Briefing.com looking for a 603,000 annual rate.

In the United States, retail sales rose 0.5% in October, boosted by strength in electronics and home improvement, the government said on Tuesday. The increase beat expectations of a 0.4% rise, but was lower than the 1.1% gain in the previous month.

Meanwhile, the Empire State manufacturing index returned to positive territory after five months in the red, indicating that manufacturing activity has been expanding in November in New York. The index edged up to 0.6, from negative 8.5 last month.

Over the weekend, embattled Italian Prime Minister Silvio Berlusconi stepped down, after the government passed a package of austerity measures. Former European Union commissioner Mario Monti was nominated to lead Italy.

Investors kept a close eye on Italian bond yields, after a ?3 billion auction of 5-year bonds generated decent demand. Yields on both the 5-year and 10-year bonds still remain above 6.5%. Last week, the 10-year Italian yield spiked to a record high above 7% - a level that eventually led to bailouts for Greece, Portugal and Ireland.

That government is expected to pass the controversial bailout package European leaders agreed to late last month, which had been a condition former Prime Minister George Papandreou set as part of his resignation.

Meanwhile, Italy's senate passed a series of austerity measures demanded by Europe, paving the way for Prime Minister Silvio Berlusconi to resign over the weekend.

A better-than-expected reading on consumer sentiment also boosted stocks. The University of Michigan consumer sentiment index for November to 64.2, up from 60.9 in October and above a consensus forecast for 61.3. The reading was the highest in five months.

Indian Markets

The infrastructure development in the country is being hit hard by a slow pace of reforms and limited long-term funding options and this trend can deter the economic growth, rating agency Standard and Poor's has warned. India's inadequate infrastructure is a major roadblock to the country's target of achieving a 9-9.5% annual growth in 2012-2017.

Amid ban on iron ore mining in Karnataka, exports of the mineral have dipped by over 25% to 35.38 million tonne in April-October period of this financial year.

Non-food credit offtake from banks grew by 18.5% to over Rs 43.11 lakh crore in the 12 months to November 4, in spite of high interest rate regime in the economy.

The cabinet has approved foreign direct investment of up to 26% in the pension sector, moving forward on a key reform initiative in the financial sector after years of dithering.

Exports from special economic zones (SEZs) grew 26.2% year-on-year to Rs 1.76 lakh crore during April-September this fiscal, according to the Export Promotion Council for EOUs and SEZs (EPCES).

Indian consumers' spending on FMCG items at modern retail stores is set to nearly triple to $5 billion by 2015 from $1.8 billion at present.

Growth in domestic steel demand dipped to 2.8% in the first half this fiscal from 8.8% in the first four years of the 11th Five-Year Plan.

Continuing its dismal performance, industrial growth fell further to 1.9% in September, mainly due to poor output from the manufacturing sector. Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 6.1% in September last year.

During the April-September period this fiscal, IIP growth stood at 5%, as against 8.2% in the same period last year. Meanwhile, the IIP growth figure for August this year has been revised downward to 3.59% from the provisional estimate of 4.1%.

Key Sectoral Movement
All the sectoral indices ended in the negative. The top losers were Oil & Gas, IT, Metals and Auto, which fell by 4.8%, 4.5%, 2.9% and 2% respectively.

Outlook
While the underlying trend remains down, we remain open to pullback rallies early next week driven by short covering. These upsides could find resistance at 5037. In terms of strategy, we recommend a go slow approach on fresh longs till we see signs of sustainable strength.

Source - HDFC Securities

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Top 10 from ShareKhan

noreply@blogger.com (Raghav R) — Thu, 10 Nov 2011 00:34:00 +0000

10 top value picks from the broking firmSharekhan:
Bharti Airtel
CMP: Rs 398
Target Price: 468
Upside %: 18

Remarks:

> Bharti continues to lead the domestic telecom market in terms of both the subscriber base (21% market share) and the revenue market share (32.3%).

> In the last two quarters the subscriber addition for the industry has moderated with the return of rationality and players shifting focus to revenue earning customers. Thus despite a fall in the subscriber net additions, the overall revenue of the industry grew by 6% sequentially in the June 2011 quarter with Bharti gaining market share by 50-basis-point.

> On the back of its improving market share, Bharti has hiked its on-net tariff by 20%, reflecting the return of pricing power. This was followed by tariff hikes by the other GSM players. We view this development as a positive one for the industry specially for the incumbent players like Bharti. The benefits of the same are likely to be reflected in the company`s financials by the end of FY2012 and starting FY2013.

> An improving domestic 2G environment, a favorable regulatory regime, (New Draft Telecom policy, TRAI`s new set of recommendations on relaxation of M&A norms coupled with share spectrum sharing) are developments in favour of Bharti. Also, visible volume and margin progress on the acquired African operations, and a strong data opportunity in the form of 3G adoption awaiting in the wings coupled with the stock`s attractive valuation keep us bullish.

> The stock trades at a trailing EV/EBITDA of 10.0x, which appears attractive in view of the 21.7% EBITDA CAGR over FY2011-13E. The implied EV/EBITDA-to-growth is 0.52x which compares favourably with the average of 0.64x for the leading emerging market telecom companies (including China Mobile, Telecom, Indosat, Idea Cellular and Bharti). Thus we maintain a Buy on Bharti valuing it at an EV/EBITDA of 8x. This leads to a price target of Rs 468.

Divi`s Laboratories
CMP: Rs 771
Target Price: 1,047
Upside %: 36

Remarks:

> Coupled with an IPR-respecting and ``non-compete with customer`` policy, Divi`s has an unstinted focus on the contract manufacturing (CM) space, thereby edging over its Indian peers.

> Its India-centric business model develops and produces all APIs/intermediates with a substantial cost advantage. Divi`s enjoys an EBITDA margin of about 40%, possibly the highest amongst its peers globally.

> After a full year of inventory downsizing, the outstanding results in H2FY2012 have re-affirmed our confidence in the company`s growth potential. The new facility at Vishakhapatnam started production from one of its blocks in June 2011. The remaining blocks are likely to get operational in a phased manner over FY2012-13, which will provide further thrust. The nutraceutical business could become a big opportunity with limited competition.

> A near debt-free balance sheet and a strong cash flow (free cash flow [FCF] likely to reach Rs 2.3 billion by FY2013E) are likely to help build a war chest for pursuing strategic investments (biosimilars).

> The appreciation of the rupee and a slowdown in the research and development (R&D) allocation at the MNC clientele remain the key challenges for the company.

> With the order inflow picking up from H2FY2011 and its new plant getting perational, Divi`s has a strong revenue growth visibility and the operating leverage in the business will boost its margins. Consequently, we estimate the company`s revenue and earnings to grow at a compounded annual growth rate (CAGR) of 23% and 21% respectively over FY2011-13. At the current market price the stock trades at a price earning (PE) multiple of 20.2x and 16.2x discounting its FY2012E and FY2013E earnings respectively. We maintain our Buy recommendation.

GAIL
CMP: Rs 424
Target Price: 541
Upside %: 27

Remarks:

> GAIL (India), a leading gas transmission company, is aggressively expanding its pipeline network and plans to invest more than Rs 300 billion over FY2010-14 in a phased manner to double its gas pipeline network to over 14,000km and its transmission capacity to around 300mmscmd. This provides strong revenue visibility in its core gas utilities business.

> We also see value accretion from doubling of the petrochemical capacity by FY2014, and from the exploration and production (E&P) and city gas distribution (CGD) businesses going forward.

> A higher than expected fuel subsidy burden and regulatory risk in its core transmission business are the key risks for the company.

> Despite the subsidy burden, the strong growth visibility in its core gas transmission business would drive its earnings.

> At the current market price, the stock trades at a PE of 13.3x and enterprise value (EV)/EBITDA of 9.0x based on our FY2013 estimates. We have a Buy recommendation on the stock with a price target of Rs 541.

Godrej Consumer Products
CMP: Rs 424
Target Price: 516
Upside %: 22

Remarks:
> Godrej Consumer Products (GCPL) is a major player in the Indian FMCG market with a strong presence in the personal care, hair care and home care segments in India. The recent acquisitions (in line with the 3x3 strategy) have immensely improved the long-term growth prospects of the company.

> On the back of strong distribution and advertising & promotional support, we expect GCPL to sustain the market share in its core categories of soap and hair colour in the domestic market. On the other hand, continuing its strong growth momentum the household insecticide business is expected to grow by 19% YoY.

> In the international markets, the Indonesian and Argentine businesses are expected to achieve a CAGR of around 25% and 15% respectively over FY2011-13. This along with the recently acquired Darling group would lead GCPL to post a top line CAGR growth of 25% over FY2011-13.

> Due to the recent domestic and international acquisitions, the company`s business has transformed from a commoditiessoap business into the business of value-added personal care and home care products. Hence, we expect its OPM to be in the range of 16-18% in the coming years. Overall, we expect GCPL`s bottom line to grow at a CAGR of about 23% over FY2011-13.

> We believe increased competitive activity in the personal care and hair care segments and the impact of high food inflation on the demand for its products are the key risks to the company`s profitability.

> At the current market price the stock trades at 24.4x its FY2012E EPS of Rs 17.4 and at 18.9x its FY2013E EPS of Rs 22.4. We have a Buy recommendation on the stock.

Grasim Industries
CMP: Rs 2,525
Target Price: 2,630
Upside %: 4

Remarks:

> Grasim Industries is well placed to capture the growing opportunity in its core business of VSF in terms of both volume and healthy realisation. In addition, the performance of its cement business (ie its key subsidiary UltraTech Cement) has shown signs of improvement with an increase in the average cement price.

> Due to the improved demand environment, the performance of the VSF division continues to shine. The VSF realisation has increased by 7.1% YoY to Rs125 per kg in Q2FY2012 on account of a pick-up in the global demand with volumes up 17% YoY.

> The cement capacity of the company at the consolidated level is the highest among the other domestic players at 52.75MTPA. Hence the company will be the key beneficiary of a likely pick-up in the demand through government infrastructure projects in the coming couple of months.

> On the other hand, the company is planning to expand its VSF capacity by another 120,000 ton by FY2013 and its cement capacity by 9.2MTPA by FY2014. We believe the capacity addition will provide volume growth in the longer run.

> We believe the company will benefit due to its strong balance sheet as most of its capex will be met through internal accruals.

> However, in light of the upcoming capacity and stabilisation of the newly-added capacity, the cement prices are expected to come under pressure. Moreover, cost pressure in terms of coal prices and higher freight cost remains a key concern.

> At the current market price the stock trades at a PE of 9.1x and 8.2x its FY2012 and FY2013 earnings estimates on a consolidated basis.

IL&FS Transportation Networks
CMP: Rs 205
Target Price: 330
Upside %: 61

Remarks:

> IL&FS Transportation Networks (ITNL) is India`s largest player in the build-operate-transfer (BOT) road segment with 10,269 lane kms in various stages of development, construction or operation. It has a pan-India presence and a diverse project portfolio consisting of 23 road projects, bus transportation and a metro rail project.

> It is well equipped to capitalise on the huge and growing opportunity in the road infrastructure sector due to its established track record in operating BOT road projects, its execution capabilities and the strong support from IL&FS.

> It has a fair mix of annuity and toll projects in its portfolio which provides revenue comfort. Further, it is present across the value chain except the civil construction services which it out sources to the local contractors. This helps the company to handle a large number of projects at a time and diversify geographically, reducing the risk of concentration.

> Thus, we expect the sales and the earnings to grow at a CAGR of 26% and 9% respectively over FY2011-13.

> At the current market price, the stock is currently trading at 8.7x its FY2012E earnings and at a price to book value (P/BV) of 1.2x. We maintain our Buy recommendation with a price target of Rs 330.

ITC
CMP: Rs 210
Target Price: 227
Upside %: 8

Remarks:

> ITC`s cigarette business, which contributes around 60%, continues to be a cash cow for the company. The company endeavours to make a mark in the Indian FMCG market and with successful brands such as Bingo, Sunfeast and Aashirwaad, ITC is already in the reckoning among the best in the industry. With the new portfolio of personal care products gaining market share, its FMCG business promises to compete with the likes of Hindustan Unilever and Procter & Gamble.

> After a sharp increase of 16% in Union Budget FY2010-11, the government has spared cigarettes from an excise duty hike in the FY2012 budget. Also key states including Kerala, Karnataka, Andhra Pradesh and Maharashtra have kept VAT on cigarette unchanged in their respective state budgets. We expect ITC`s cigarette sales volume to grow at mid single digits in FY2012.

> ITC`s other businesses, such as hotel, agri, non-cigarette FMCG business and paper, paperboard and packaging, is showing a strong up-move and will provide a cushion to the overall profit in FY2012.

> An increase in taxation and the government`s intention to curb the consumption of tobacco products remain the key risks to ITC`s cigarette business over the longer term.

> We expect ITC`s bottom line to grow at a CAGR of about 21.2% over FY2011-13. At the current market price, the stock trades at 26.6x its FY2012E earnings and 22.4x its FY2013E earnings. We maintain our Buy recommendation on the stock.

Mahindra & Mahindra
CMP: Rs 835
Target Price: 865
Upside %: 4

Remarks:

> M&M is a strong rural India story benefited by rising agriculture incomes. The farm equipment sector is estimated to grow by 11-13% in FY2012 due to an expectation of better monsoon and greater need for farm mechanisation following labour shortages.

> The automotive sector is expected to grow by 12-15% in FY2012. The new sports utility vehicle (SUV) XUV 500 as well as the existing utility vehicles (UVs) + pick-ups portfolio are expected to deliver a good volume growth for the year.

> The company is expecting partial roll-back of the Maharashtra VAT reversal decision shortly. While negatives have been factored in, any decision on the roll-back by the government will be positive for the company.

> Launches expected in FY2012: new SUV, Reva electric NXR, M&M-Navistar trucks and SsangYong SUVs in India.

> Our SOTP based price target for M&M is Rs 865 a share as we value the core business at Rs 708 a share and the subsidiaries at Rs 157 a share. We recommend Buy on the stock.

PTC India
CMP: Rs 73
Target Price: 98
Upside %: 35

Remarks:

> PTC India is the leading power trading company in India with a market share of around 33% in CY2010. Trading volume growth is secured by entering into long-term power purchase agreements (PPA) with power developers.

> Driven by an exponential growth in its traded volumes and an uptick in the trading margins, we expect earnings to grow at a CAGR of 17% over the next two years.

> In the last few years, the company has also made a substantial investment in various areas like power project financing via PFS or taking direct equity stake, coal trading and power tolling which have great growth potential in the future.

> Given its niche positioning and strong growth outlook with improving core return on equity (RoE), the valuations are quite attractive on a sum-of-the-parts basis.

TCS
CMP: Rs 1,099
Target Price: 1,250
Upside %: 14

Remarks:

> TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in most service offerings and is in the process of further consolidating its leadership position through the organic and inorganic route as well by winning large deals.

> TCS has consistently increased its market share amongst the top 5 Indian outsourcers with market share in terms of revenues increasing from 29.2% in the March 2009 quarter to 30.3% in the September 2011 quarter.

> We continue to like TCS amongst the offshore IT vendors on account of its mammoth scale of operations and resilient cost model that allows it to withstand headwinds in the sector. On the other hand, at the current juncture TCS is well placed to garner incremental deals in the sector with the organisational structure in place, unlike Wipro and Infosys that are going through a phase of organisational restructuring.

> At the current market price the stock trades at 20.4x and 17.6x its FY2012E and FY2013E earnings respectively. We have a Buy recommendation on the stock with a price target of Rs 1,250.

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9 Diwali Stocks from Kotak

noreply@blogger.com (Raghav R) — Tue, 25 Oct 2011 03:18:00 +0000

The last Samvad year has been challenging for the markets with both, global and domestic concerns weighing on the indices. The new Samvad year brings hope of some solution to the global economic crises and speedy action from the Government in India.

In this background, broking firm Kotak Securities has selected some stocks which look attractive from an investment perspective. It opines these stocks may have a relatively lower downside in case of a sharp fall in markets. The same are as follows:

TCS:

CMP - Rs.1,049

Current TP - Rs.1,240

> We opine that, recent management commentary reflects greater optimism, likely on the back of strong pipeline and better deal flow.

> Management has seen continued revival in discretionary spends as well as in cost efficiency initiatives, which is encouraging.

> Stock is available at about 16.9x FY13 estimates.

ICICI Bank:

CMP - Rs 871

Current TP- Rs 1,364

> ICICI bank is better placed vis-Ã -vis its peers with robust liability franchise (CASA mix at ~42% at the end of Q1FY12), improving asset quality, healthy margin (NIM at 2.6% in Q1FY12).

> After achieving substantial success on 5Cs (Credit growth, CASA, Cost optimiza-tion, Credit quality and Customers), ICICI Bank is likely to continue its focus on profitable growth.

> After stripping the value of subsidiaries (Rs.236), stock is trading reasonable at 1.25x its FY12 ABV.

JP Associates:

CMP- Rs 70

Current TP- Rs 90

> Cement volumes are likely to jump going forward due to incremental capex while construction division revenues would start picking up by FY13.

> Along with this, post completion of cement capex, company is expected to utilize free cash flows for debt reduction.

> Thus, debt reduction and decline in interest rates would be positive for the company.

> Stock is available at about 9.2x EV / EBIDTA on FY12 estimates.

BEL:

CMP- Rs 1,522

Current TP - Rs.1,913

> The company enjoys a dominant status in the defence sector and has a steady growth profile, a key positive in the current economic environment.

> Order backlog is strong at Rs 230 billion, providing revenue visibility of 43 months, one of the highest in capital goods sector. We thus see revenue growth rates to move up in the future.

> The business is high-end with rich profitability and strong cash generator.

> BEL would remain a preferred vendor to the Indian defence sector.

> Stock is available at about 11.2x FY13 estimates.

Cummins India:

CMP - Rs 393

Current TP - Rs 507

>Company is well poised to benefit from recovery in the infrastructure spending in India.

> Commencement of mega production site at Phaltan is likely to ease out capacity constraints and would add to cash flow generation from Q3FY12E.

> Company has committed a Capex of USD 300 million funded mainly through internal accruals.

> Stock is available at 10.3x FY13 estimates.

IRB infra:

CMP - Rs 160

Current TP - Rs.246

>Company has a strong order book for its EPC division and is also ideally positioned to benefit from toll rate hikes in line with inflation in most of its toll projects.

>It also has sufficient funds to meet equity requirements of existing and new projects and is best positioned to capture upcoming opportunities in the road segment.

>Stock is available at 8.6x FY13 estimates.

Indraprastha Gas:

CMP - Rs 400

Current TP - Rs 450

>Looking at the growth potential in the City Gas Distribution, rich experience, huge demand of natural gas and strong promoter background, we are bullish on IGL.

>We believe that the strong trends in CNG and PNG segment will continue and IGL is best placed to benefit from rising gas consumption in India.

>Based on our estimates, the stock at current market price of Rs.400 is trading at 8.3x EV/EBIDTA and 14.5x P/E on FY13E earnings.

HT Media:

CMP - Rs.138

Current TP - Rs.200

> Investments in three large markets (HT-Mumbai, Hindustan-UP, and Mint-business newspapers) over the past five years shall provide industry-beating growth in the coming years as readership reaches threshold levels in market share in key markets.

> Two of the company`s properties (HT-Mumbai, Mint) are set to achieve breakeven towards FY12-end.

> Valuations are reasonable at 11.8x PER FY13E.

NIIT Tech:

CMP - Rs.230

Current TP - Rs.300

>The company reported eight successive quarters of high volume growth.

>Non-linear revenues continue to grow at the company average and form about 27% of revenues.

> The order bookings in 2QFY12 were high at USD 200 (USD 86 million), indicating a conducive macro scene.

> The company may have net cash of about Rs.65 a share by FY13 end, as per our estimates.

> Stock is available at 6.3x FY13 estimates.

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5 Diwali mahurat picks from ICICIdirect

noreply@blogger.com (Raghav R) — Tue, 25 Oct 2011 03:08:00 +0000

The global economy is once again passing through turbulent weather in terms of the growth trajectory. Soft economic data points coming out of western economies (weak PMI readings breaching the critical level of 50 globally, discouraging consumer confidence retesting the 2008 lows and stressed housing sector) coupled with the perplexing sovereign debt crisis in the peripheral Euro zone has once again raised the odds of a double dip recession in the troubled western economies. Hence, the downgrade of US debt (July 2011) by the rating agencies was merely a catalyst for the ruthless sell off that risky asset prices have witnessed post the downgrade, further adding to the odds of a double dip. The impact MSCI Developed Markets were down by 15% from July-September 2011 coupled with huge volatility.

``We expect more of a time based correction and expect the markets to oscillate in a broad trading range till the time reasonable clarity emerges from the various local and global macro headwinds. In case of a negative outlier event, the markets may fall further in the wake of panic selling. However, we do not expect the markets to sustain at such levels. In such an environment, timing the markets would become extremely difficult. We believe any sharp cuts should be bought into from a three to five years perspective. Buying is recommended in large caps and selective quality midcaps. Hence, for Mahurat 2011, we would stick to high quality large caps and midcaps such as Bharti Airtel, Biocon, HPCL, HDFC Bank and ITC,`` said the broking firm ICICIdirect.

Following is the investment rationale on 5 Diwali Mahurat picks from ICICIdirect:

Bharti Airtel:

> The industry scenario has improved over the past few quarters with the ongoing CBI enquiry into the 2G scam. The recent price hike by incumbents signifies reducing competitive intensity and returning pricing power. Airtel is expected to post an improvement in ARPMs in the coming quarters on the back of the recent price hike and traction in 3G services. With the withdrawal of unsustainable customer acquisition offers from the market and reducing dual SIM phenomena, margins in the domestic market are expected to improve, going ahead

> Africa operations have shown continual improvement in key metrics. EBITDA margins have expanded by 276 bps in the past three quarters. With outsourcing agreement in place, the benefit in terms of further margin expansion is expected to kick in from FY13 onwards.

> DoT expects NTP 2011 to come into effect by Dec. 31, 2011. Most of the negatives related to one-time spectrum fees seem to be already priced in. Spectrum trading, pooling and sharing would help larger players like Bharti Airtel. At the CMP of Rs 385, the stock is trading at 16.1x FY13EPS against its long-term average of 19.3x. Also, with most of the capex already incurred, return ratios would also improve, going ahead

Biocon:

> The out-licensing deal with Pfizer to launch four human insulin products in emerging and advanced markets post patent expiry augurs well for Biocon. It has started supplying Fidaxomicin (antiinfective) API to US based Optimer`s patented product Dificid for which the company is a sole supplier. The recent launch of reusable pen in the domestic market is a promising move for the company. Divestment in Axicorp is expected to boost EBITDA margins.

> The R&D services business is witnessing a consistent improvement both in terms of revenues and profitability over the last three quarters. The key trigger will be the unlocking of R&D business through IPO.

> We expect sales and profits (after adjusting Axicorp numbers in FY11) to grow by 22% and 20%, respectively, between FY11 and FY13E. Biocon is currently trading at 18x FY12E EPS of Rs 19.3 and 15x FY13E EPS of Rs 24.

HDFC Bank

> We expect healthy business growth of 20% CAGR over FY11-13E with a well diversified loan book (50:50 between retail and wholesale) and strong liability franchise (CASA ratio of 48%)

> Margins will be protected at over 4% (one of the best across industry). Healthy asset quality will lead to lower credit costs The bank commands a premium multiple of 3.8x FY13E ABV because of consistent track record of 30% YoY growth in PAT, higher margins and healthy asset quality. We expect PAT growth of 30% CAGR over FY11-13E and RoA of 1.9% and RoE of 21% by FY13E.

HPCL:

> Hindustan Petroleum Corporation (HPCL), a Fortune 500 company, is engaged in refining and marketing of petroleum products in India. It operates two refineries with 16.3 mmtpa capacity in FY11 and has 18% share in marketing of petroleum products. HPCL, in a joint venture with Mittal Energy, is setting up a 9 mmtpa refinery at Bhatinda, which would be operational in FY12E

> We believe capacity expansion, increase in retail sales volume and higher refining margins would create value for investors, going forward. Also, government policy and reforms in the pricing of sensitive petroleum products could reduce net underrecoveries of the company. We have assumed Brent crude oil prices of USD 100 per barrel and net under-recoveries of 8.8% for OMCs in FY13E.

> HPCL is trading at 7.5x FY12E and 6.3x FY13E EPS of Rs 46.1 and Rs 55.2. HPCL`s book value of Rs 439 in FY13E also offers good risk reward ratio to long-term investors. Sustained higher crude oil prices and adverse government policy remain risks to our recommendation.

ITC:

> With a leading position in its various businesses, we expect ITC to sustain its gross revenue growth at 12.6% (CAGR from FY11-14E), driven by healthy growth in FMCG (18.6%), agri business (16.3%) and paperboards (13.7%) with a moderate growth in cigarette (10.1%) and hotel (8.8%) revenues.

> ITC is the market leader in the Indian cigarettes industry and enjoys 75% volume share (FY11). Its cigarette revenues (gross) have grown by 1.5x, from Rs 1,28,337 million in FY07 to Rs 1,98,276 million in FY11, largely driven by price growth of 11.3% with volume growth remaining flat. Being a dominant player, passing on the impact of higher taxes through price increases has not been tough for ITC. Therefore, we expect revenues from cigarettes to continue growing at a CAGR of 10.1% (FY11-14E) driven by 5.3% price growth and a lower volume growth of 4.5%

> Comparing with global peers like British American tobacco (BAT), Philip Morris and Japan Tobacco, ITC should trade at a premium given the opportunity size of the Indian market and expected higher earning growth. Simultaneously, a substantial reduction in FMCG losses and visibility of break-even would result in the FMCG segment commanding a higher valuation than the historic average. We remain positive on the stock from a 9 to 12 months perspective.

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Union Bank - Poor Results Avoid

noreply@blogger.com (Raghav R) — Tue, 25 Oct 2011 00:28:00 +0000

Union Bank of India touched a 52-week low of Rs 211.65. At 14:41 hrs the share was quoting at Rs 212.65, down Rs 27.30, or 11.38%.

Union Bank disappointed the street by its numbers, falling over 9%. Net profit for the second quarter of FY12 stood at Rs 353 crore as against expectations of Rs 519 crore and net interest income reported at Rs 1,661 crore while CNBC-TV18 poll saw it at Rs 1,626 crore.
It was trading with volumes of 774,856 shares. In the previous trading session, the share closed down 4.10% or Rs 10.25 at Rs 239.95.

Performance :
The scrip has grossly under performed and has been losing on all paramters and is now headed for steeper fall going forward.

Share Price Movement During The Last 12 Months
Period	Price	Latest Price	Gain/Loss (Rs.)	% Gain/Loss
3-Days	249.35	212.65	-36.70	-14.72
5-Days	250.45	212.65	-37.80	-15.09
7-Days	253.10	212.65	-40.45	-15.98
15-Days	229.90	212.65	-17.25	-7.50
1-Month	241.60	212.65	-28.95	-11.98
3-Month	294.10	212.65	-81.45	-27.69
6-Month	333.10	212.65	-120.45	-36.16
9-Month	326.85	212.65	-114.20	-34.94
1-Year	403.00	212.65	-190.35	-47.23

Our Recommendation :

The stock is poised to test 150 levels and should be avoided due to poor performance during the last 12 months. HOwever long term investors with a holding time frame of 12-18 months should avail the steep correction to add to their portfolio and buy around 150 levels

Bought to you By :

Ingenious Investor

Equity Research Division

Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

BSE / NSE Weekly Analysis for the week ending 21 Oct 2011

noreply@blogger.com (Raghav R) — Mon, 24 Oct 2011 02:12:00 +0000

BSE / NSE Weekly Analysis for the week ending 21 Oct 2011

The market declined for the week ended 21 st October 2011 due to trailing weakness in global shares caused by disappointment over the pace of European rescue plan. Investors feared building fresh positions as data showing acceleration of food inflation early this month raised prospects of more rate hikes from the central bank to tame inflation, which remains uncomfortably high. Stock specific action was witnessed as most index heavyweights announced their results for the quarter ending September 2011.

Foreign institutional investors (FIIs) outflow in October 2011 totaled Rs 675.20 crore (19th October 2011). FII outflow in calendar 2011 totaled Rs 966.80 crore (19th October 2011).

Indices Review

The BSE Sensex fell 297.05 points or 1.74% to settle at 16,785.64 in the week ended Friday, 21 October 2011. The 50 shares S&P CNX Nifty fell 82.35 points or 1.60% to 5,049.95

The market declined this week, trailing weakness in global shares caused by disappointment over speed of European rescue plan. Investors feared building fresh positions as data showing acceleration of food inflation early this month raised prospects of more rate hikes from the central bank to tame inflation, which remains uncomfortably high. Stock specific action was witnessed as most index heavyweights announced their June-September 2011 quarter results.

Foreign institutional investors (FIIs) outflow in October 2011 totaled Rs 675.20 crore (till 19 October 2011). FII outflow in calendar 2011 totaled Rs 966.80 crore (till 19 October 2011).

Inflation, as measured by the wholesale price index (WPI), rose 9.72% in September 2011, compared with a 9.78% rise in August 2011, data released by the government on 14 October 2011, showed. WPI inflation for July 2011 was revised upwards to 9.36% from the provisional reading of 9.22%.

Trading for the week began on a weak note. The BSE Sensex

fell 1.74% to settle at 16,785.64 in the week ended Friday, 21 October 2011. The 50 shares S&P CNX Nifty fell 1.60% to 5,049.95. The BSE Mid-Cap index fell 1.26% and the BSE Small-Cap index fell 1.20%. Both these indices outperformed the Sensex.

Sectoral Review

Capital Goods:

The BSE Capital Goods index fell 4.38% to close at 10,558. Among the heavyweights in the industry Crompton Greaves, L&T, BHEL & Siemens fell 14.0%, 5.1%, 4.1% & 2.6% respectively. Disappointing L&T Q2 numbers dragged the gauges in the negative zone. L&T tumbled 5.1% to Rs 1336 after the company cut its order growth guidance for the current fiscal year to 5%, from 15% earlier. Order flow is being hampered by investment slowdown, project deferrals and higher competition

IT:

The BSE IT index fell 3.04% in the week to close at 5,526 levels. TCS, HCL Tech, Wipro, and Infosys fell 7.6%, 6.4% 2.6% and 0.8% espectively. TCS was the top loser this week. The stock declined 7.60% to Rs 1048.25 after disappointing Q2 results, which the company announced after market hours on Monday, 17 October 2011. TCS chief financial officer and executive director S Mahalingam on Tuesday, 18 October 2011, said that TCS would cut costs and focus on high-margin services to maintain its profitability in the traditionally weak October-December quarter. TCS' consolidated net profit fell 4.7% to Rs 2301 crore on 7.7% growth in revenue to Rs 11633 crore in Q2 September 2011 over Q1 June 2011.

Realty:

The BSE Realty index fell 2.96% to close at 1,773 levels. HDIL, Indiabuls Real Estate, DLF, Unitech and fell 8.1%, 7.3%, 3.1% and 2.4% respectively. DLF declined 3.1% to Rs 225.05 after the Securities and Exchange Board of India (Sebi) said on Thursday, 20 October 2011, that it would investigate allegations against the real estate developer that it failed to disclose a police complaint against an associate firm in its share sale document in 2007. The allegations were from a complainant who alleged that Sudipti Estates, which he said was an associate of DLF, had duped him of about Rs 34 crore.

Power:

The BSE Power index fell 2.78% to close at 2,108 levels in the week ended 21st October 2011. Crompton Greaves, BHEL, Tata Power, NTPC fell 14.0, 4.1%, 2.7% and 2.2% respectively. Crompton Greaves has announced its financial results for the quarter and half year ended September 2011. During 2QFY12, the company has reported 13% YoY rise in sales and 45% YoY decline in net profits. The rise has come on the back of around 12% YoY growth in power systems business and about 29% YoY rise in industrial systems business.

However, growth in the consumer products segment was muted at about 4% YoY. Operating profits declined by 32% YoY during 2QFY12 as operating costs grew by 20% YoY. Further, significant increase in interest cost and depreciation charges during the quarter caused the bottomline to decline by about 45% YoY. During 1HFY12, the company's sales increase by 9% YoY, while net profits decline by 52% YoY

Oil & Gas:

The BSE Oil & Gas index fell 2.37% to close at 8,650 levels in the week ended 21st October 2011. Reliance Industries and ONGC fell 3.6% and 0.5% respectively. Reliance Industries (RIL) fell extending recent losses triggered by weak Q2 operating performance. The core operating profit margin (OPM) declined sharply to 12.5% in Q2 September 2011 from 16.3% in Q2 September 2010. Media reports had suggested recently that RIL may suspend oil and gas drilling operations for an unspecified time until an internal valuation of its exploration and production strategy.

Outlook

High volatility is expected on the bourses in a truncated trading week. There are many variables for investors to grapple with, including corporate earnings, a policy review from the Reserve Bank of India, expiry of the near-month October 2011 futures & options contracts and a European Union summit to finalize a package of comprehensive measures to tackle the eurozone debt crisis.

The near-month October 2011 derivatives contracts expire on, 25th October 2011. Furthermore with the rupee hitting a near 30-month low below the 50/$ level against the dollar, shares of exporters including IT firms may edge higher while those of the importers may witness an adverse impact.

With inflation remaining at uncomfortably high level, the Reserve Bank of India (RBI) is seen delivering another rate hike of 25 bps at its half-yearly review of the monetary policy on Tuesday, 25th October 2011.

A special muhurat trading session is scheduled on the bourses from 16:45 to 18:00 on Wednesday, 26th October 2011on account of Diwali. There is no regular trading session on that day. The market also remains closed on Thursday, 27 October 2011, on account of Diwali, the festival of lights.

Bought to you By :

Ingenious Investor

Equity Research Division

Ravina Consulting

Pattamal Plaza

3rd Cross Kamanahalli

BANGALORE 560084

For Free Stock Advise + Ideas

sow...@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com