WPI + Exports + IIP - What to Look for Before Comitting Now ?
Wednesday, May 20, 2009
What are the Indicators an Investor must be watching for before committing his funds after the recent rise in stocks ? Here are some important indicators that has the potential to change the direction of the Indian markets.
Will WPI inflation move into negative territory by May end/ early June on high base ? Whether food prices will continue to be higher on supply constraint ? Or whether monsoon will be adequate in terms of quantum, timing and distribution, resulting in better harvest driving food prices lower?
Is the auto sector benefiting from a combination of increased availability of financing, cheaper cost of borrowings and improved demand following enhance purchasing power due to various fiscal measures? Can it be sustained ? Whether the demand from the rural sector will be able to boost the non-durable sector?
Will the IIP improve from April as suggested by various lead indicators (like PMI index, auto sales, cement dispatches, steel production, port traffic) as well as favourable base? Or will it take global demand to boost our manufacturing and hence IIP ?
After aggressive rate cutting, RBI seems to be at the end of policy rate cutting cycle. But will banks cut lending rates further which in turn, will boost economic activity ?
Finally, whether the resounding victory of the incumbent Govt will put reform process on track (disinvestment of PSUs, pension reform, 3G auction, FDI restriction etc)? Will this bring back confidence and foreign capital inflows supporting growth and rupee ?
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Published by Webmaster @ 7:10 PM IST.
Rising Tide Lifts All Boats / Stocks - Go Selective
Tuesday, May 19, 2009
We had anticipated a strong market rally, in our view the 20-25% higher closing prices of several index heavyweights reflects the strong pull from the futures market rather than genuine price discovery in the cash market. The substantially higher activity in futures and options (US$560m) supports anecdotal evidence that futures were the preferred choice of participants for gaining exposure to the expected market rally on the basis of cost and effectiveness.The extent of the rally in some names is not that surprising if viewed against the re-rating that would be predicted by a Gordon Growth Model for an event that resulted in a significant reduction in the equity-risk premium. For the Sensex, the model suggests 25% upside to PB multiples for a 50bps reduction in market risk premium, based on assumptions of 16% sustainable ROE and 10% long-term growth (a lower growth assumption would render the model invalid during the 1998-99 period). A 50bps reduction in the equity risk premium would not be unrealistic for an event that represents a shift from an unstable ruling coalition to stable coalition with strong leadership, given that average equity risk premium during 1998-2009, as derived from our model, has been 5.6%.
In some cases, stocks have participated fully in the rally despite question marks on fundamentals. Financials look well positioned for further re-rating while Capital Goods like BHEL look fully priced in. However, stay invested in Financials for more action.
Be selective while BUYING any Midcap or Smallcap as the word from our Guruji was Caution with an underlying tone of optimism.
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Published by Webmaster @ 7:23 PM IST.
Golden Monday - Markets trigger final upper limit
Monday, May 18, 2009
Equities triggered final upper limit on Monday in response to Congress-led United Progressive Alliance's (UPA) unparalleled victory at the general elections.
When the market halted for the day, the Sensex was at 14, 272.63, up 2099.21 points or 17.24%. Similarly, the Nifty gained 636.4 points or 17.33% to 4308.05 at that time. The base for calculating the percentage rise was SENSEX and NIFTY closing figures of March-31st. I don't know who did this rule, but this is the rule.
According to the new rules, if there is 10% movement of either Sensex or the Nifty, trading is halted for an hour market, if this happens before 1 pm. Post 1 pm but before 2.30 pm, there is halt for half-an-hour, while after 2.30 pm, trading does not halt at the 10% movement.
If there is 15% movement in Sensex or the Nifty, trading will be halted for two hours if the movement happens before 1 pm. After 1 pm but before 2 pm, trading will be halted for one hour. Similarly, if there movement on or after 2 pm, there will be no trading for the rest of the day.
Trading will be halted for the entire day, if there is a 20% movement of the indices.
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Published by Webmaster @ 12:31 PM IST.
Verdict and Direction for the Market
Sunday, May 17, 2009
The situation of ambiguity has come to an end. This is a big relief for the Investor fraternity as this is a mandate to the run the Government for the next five years and most importantly Congress would have a say as far as the policies and the key ministerial berths are concerned.
Political risk premium, in our opinion, certainly would recede significantly with this decisive mandate. This is likely to help India improve its sovereign rating going forward. The weightage assigned to the Indian Equity within the emerging market space would be realigned. We expect the money waiting at the sidelines to move in now resulting in rerating of Indian equities, driven by the outcome of elections and therefore expect the base PE to move up. Currency is also likely to move up.
We expect the government to move fast as far as Infrastructure activity on the ground level is concerned.
Sectors One Should Focus on are - Banking & Financial, Infrastructure and related [Metals, cement etc] barring Real Estate, Capital Goods, Energy and selectively in Auto.
The markets are likely to do a gap up 4%~5% in the opening trades on Monday. Our Indices have risen almost ~43% from early march. We should not rule out the possibility of smart operators and traders booking profits in the market. Investors should not get carried away with sheer exuberance. Therefore the strategy post the gap opening should be of caution albeit optimism. Investors are advised to do thematic and structured Investment over a period of time.
Update:
Kindly note that some banks may fail to report good numbers for Q1, Q2 FY10 due to the stress in the current and past quarters. However, the flurry of activities by FIIs is likely to take these stocks higher as they have substantial BUYING limits as well as low P/E and enhanced reforms.
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Published by Webmaster @ 7:46 PM IST.
Review of Earnings Season Till Date
Thursday, May 14, 2009
55 of the Top companies have reported results. Aggregate earnings fell 3.2% YoY against streets' expectation of a 7% fall YoY. In terms of surprise breadth, for 53%, or 29, companies' net profits exceeded expectations by 5% or more, while 16 companies reported results that trailed our analyst expectations by 5% or less. Only three companies of this pack have reported losses.
Eighteen companies in the BSE Sensex have reported thus far, with aggregate earnings down 11% YoY, compared with expectations of a 7% fall. Excluding the energy sector, the Sensex earnings are down 14%, below expectations.
At the sector level, industrials and consumer staples are the key positive surprises. Consumer Staples is the best performing sector in terms of profit growth, followed by Technology, while Materials is the worst-performing sector. Excluding the Financials sector, aggregate net profit for this sample is down 3.2%.
Overall, 1,571 companies have reported. While revenue is up 1.6% YoY, net profit is down 11% YoY. Of these 1,571 companies, 34%, or 527 companies, have reported losses for the quarter ended March 2009.
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Published by Webmaster @ 7:57 AM IST.
HSBC Overweight on Energy + Financials
Monday, May 11, 2009
India has been one of the best performing markets since mid March with ~ $2.0 bln of FII inflows moving into Indian equities in the past 2 months. Expect to see signs of stress on account of the slowdown, Indian companies' earnings have been among the least volatile among emerging markets. Earnings are likely to remain under pressure for the next one to two quarters, as the full effects of the earlier monetary tightening measures and the credit squeeze feed through the economy.
Indian markets will continue to take cues from global developments and global market movements. The correlation of Indian markets to global markets has increased significantly over the last 12 months.
HSBC remains positive about Indian equities over the longer term, but near term market movement is likely to depend on FII flows and election news flowand results. Based on historical trends, equity valuations remain reasonable at 11400 levels. At 11500, India trades at a P/E of 13.5X FY09e EPS and 12.5X FY10 estimate.
Long term investors could use an SIP approach over the next few months. Clients with high risk appetite could look at initiating exposure to mid cap funds and stocks as the valuation gap to large caps continues to increase. Given the severe correction in mid caps during CY2008 and the underperformance in the recent rally, there appears to be more value in mid caps.
HSBC is overweight on Energy and Financials. Underweight on Real Estate and Healthcare. Neutral on IT, Capital Goods, Materials and Industrial Metals.
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Published by Webmaster @ 1:12 PM IST.
Elections Reults Impact on Markets
Sunday, May 10, 2009
How to read the election numbers is probably the most important question on Investor's mind. Here are some combinations and its impact on the market.
The best case with a negligible chance is a scenario where the leading coalition gets over 200 seats. This would be expected to cause the markets to soar immediately and would be good longer term too.
The worst is the scenario where both leading coalitions have less than 160 seats. Bad for equities in the short and long term.In this scenario, both leading parties would have fewer than 140 seats. This would not only raise the
chances of a third-front government, but also need a long time for things to settle.
In the base case, at least one of the coalitions will have between 160 and 200 seats. If the difference between the two coalitions is more than 25 seats, the market would likely perceive the results conclusive and take it positively. If not, the process could be chaotic. Either way, uncertainties could remain high in the market based on the course the coalition formation process takes with Horse Trading taking the center stage amongst Highly Corrupt Politicians and elected representatives of the country.
As they say, the only thing predictable in such events is the unpredictability.
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Published by Webmaster @ 9:29 AM IST.
Best + Worst Performers in the Bear Market Rally
Saturday, May 02, 2009
With the Sensex strong 35% rally from the 9th March low, 15 of the BSE-100 stocks in our coverage are within 10% of their 52 week high. As expected in a liquidity driven rally, asset plays, deep cyclicals and highly geared companies dominate the list.
We present to you the best and the Worst Performers in the recent bear market rally starting from March-9th.
Stock: Appreciation in %ge
HDIL 119.3
Deccan Chronicle 118.8
Jaiprakash Associates 97
JSW Steel 93.2
Axis Bank 88.9
Unitech 73.2
Suzlon Energy 73.1
Hindustan Times 72.1
Tata Motors 70.3
Bank of Baroda 68
Pantaloon Retail 67.2
ICICI Bank 67.1
Punj Lloyd 62.8
DLF Ltd 62.1
Jet Airways 58.6
Educomp Solutions 57.8
Petronet LNG 57.5
Reliance Communication 56.9
Sterlite Industries 56.8
Punjab National Bank 55.8
Larsen & Toubro 55.3
Tata Steel 53.8
Wipro 53.3
Reliance Petroleum 52
Reliance Infrastructure 50.6
Reliance Industries 50.5
And the worst-performers in the BSE-100 are as follows
Glaxo Smithkline (0.9)
Powergrid 1.5
Titan 1.8
Nalco 3.5
Hind Unilever 4.0
Apollo Hospitals 4.6
NTPC 5.0
BPCL 8.4 and
Indian Oil 10
Except Glaxo Smithkline which has fallen by 0.9% others managed to arrest the downfall but have hardly appreciated.
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Published by Webmaster @ 9:13 AM IST.
What FIIs Sold + Bought in Q4 in India ?
Friday, May 01, 2009
We have collected data from various sources and put together a list on stocks which FIIs have sold / bought in the quarter ending March-31st-2009. This is cumulative data and we have witnessed the recent bear market rally from March-9th to April-10th. So this could be the approximate holding pattern of FIIs in the companies listed in the spreadsheet.Prominent companies where FIIs offloaded their stake is as under,
-94.56 implies, they have sold 94.56% of the FIIs pie, don't confuse it to them holding 94.56% of the entire equity.
Tata Teleservices (Maharashtra) Ltd -94.56
Housing Development & Infrastructure Ltd -57.49
Corporation Bank -57.21
Indian Overseas Bank -51.18
Suzlon Energy Ltd -33.74
Kolte Patil Developers Ltd -31.69
Gateway Distriparks Ltd Logistics -30.23
Reliance Communication Ltd -7.16
Infrastructure Development Finance Company Ltd -4.09
See the entire list of FIIs Selling Stake in Indian Markets in Q4-FY2009 [March Quarter]
FII Buying in India during March Quarter-09:
They have bought stocks like OnMobile Global, IPCA Labs, Mindtree, Hindustan Construction, JP Associates, UTV Software, AIA Engineering etc. You can see the entire list of stocks which FIIs have bought in the quarter ended March-2009.
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Published by Webmaster @ 7:30 PM IST.
