RBI Hikes Repo Rate by 50bps + CRR by 25bps
Tuesday, July 29, 2008
The RBI has tightened money supply in the Indian markets by raising the CRR by 25 bps and in a surprise move raised the repo rate by 50 bps taking it to 9.0% [This is the rate at which banks will borrow from RBI] We had expected a 25bps repo rate hike.GDP growth projection for 2008-09 revised from the range of 8.0-8.5 per cent to around 8.0 per cent, barring domestic or external shocks. While the policy actions would aim to bring down the current intolerable level of inflation to a tolerable level of below 5.0% as soon as possible and around 3.0 per cent over the medium-term, at this juncture a realistic policy endeavour would be to bring down inflation from the current level of about 11.0-12.0 per cent to a level close to 7.0% by March 31, 2009.
The Indian Stockmarket has reacted sharply to the news and the BSE SENSEX was down 500 points. Banking and Real Estate Stocks are the worst Hit.
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Published by Webmaster @ 12:30 PM IST.
Why Avoid ICICI-Direct Online Trading ?
Monday, July 28, 2008
We all know by now that ICICI Bank is one of the Worst Banks in Customer Service as well as QoS in every service that it provides. From Credit Cards to Online Trading, the bank's management sucks and it is high time that the RBI and Finance Ministry and concerned authorities take stock of the situation before it gets out of control.
Today, I am writing to expose ICICI Direct Online Share Trading Platform. The day was July-23rd, a day after Trust vote when the markets surged. I tried to SELL some shares of HDFC Bank which I had bought earlier and ICICI Direct interface would not let me place the order and this is the error I got [see picture].
This clearly shows that ICICI Direct has bug in their trading system. First, there is no circuit limit for HDFC Bank stock. Second, the timing I tried to execute the order was 23 minutes after the start of the trade [I can understand had it been just a minute, due to performance issues since ICICI Runs on Windows Infrastructure] Lastly, ICICI's pathetically trained executives didn't even have the god dam common courtesy to acknowledge my problem, they think they are the Architects of this system and say so confidently that "everything is working fine".
Now, seriously tired of ICICI and will avoid henceforth.
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Published by Webmaster @ 11:42 AM IST.
RBI Monetary Policy Review - Expect 25bps CRR Hike
Saturday, July 26, 2008
RBI's quarterly policy review is due on Tuesday, the 29th of July. Inflation continues to be at 12% level and we see some deceleration in growth numbers of Indian corporates. RBI policy officials have gone on record to say,the government's first priority is inflation and price stability; we may have to sacrifice a bit of growth to tackle inflation.We expect the RBI to hike CRR by 25-50bps either in its July 29th policy or later, in August. However, declining oil prices could alter the equation to some extent.
Since the inflation is out of RBI's 5% comfort zone and the Central Government of India turning a blind eye without banning speculation in essential commodities the RBI is left with no other alternative, but to continue to use a combination of repo/reverse repo and CRR hikes to further temper demand-side pressures.
RBI may further liberalize borrowings through ECB - External Commercial Borrowings route for Indian corporates. RBI may broadly stick to its FY09 growth estimate of 8%-8.5%.
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Published by Webmaster @ 2:58 PM IST.
Book Profits in the Bear Market Rallies
Friday, July 25, 2008
India's long-term story is intact but unfortunately we are in a bear market. The 5 main factors adding fuel to the fire are - Macro, Global Risk Appetite, Monsoon, Earnings Outlook and Sentiments.The macro is bad with high crude oil prices and hence rising inflation, slowing growth and ultimately, higher long bond yields. Global risk appetite or global financial market conditions are key given India's relatively high beta status underpinned by how India's balance sheet is funded.
Possibility of a bad monsoon in Karnataka, Maharashtra, Andhra Pradesh and Parts of Central India will dampen the Agri sector. Earnings outlook is weak. 6 Months ago only the American stocks were hit and we had the de-coupling theory, however with Q1FY09 results, it is evident and the consensus is ready to cut numbers due to slowing growth. Fragile sentiment which could get a lot worse before getting better.
This Rally will sustain and move sidewards if crude remains soft, Inflation stays sub 12%, the RBI delivers a benign policy at the end of July on the back of slippage in crude oil prices and the earnings season does not produce a major negative.
Financials and Capital Goods are likely to underperform; Healthcare and Telecom will likely outperform. Keep booking profits on Rallies only to BUY Back at lower levels later bringing down your average cost of acquisition.
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Published by Komal M @ 12:17 PM IST.
Can Manomhan and Chidambram Duo Deliver Now ?
Tuesday, July 22, 2008
In a day of political drama, characterized by various allegations/suitcase politics, the incumbent UPA govt won the trust vote yesterday by a bigger than expected margin of 19 votes. Besides going ahead with the nuclear deal, tackling the high inflation (especially in the context of a not so good monsoon) needs to be priority #1 task for the Government.
Dr. Singh's new ally the Samajwadi Party has voiced concern on FDI in retail. However, reforms that appear non-controversial include those in pensions, divestments, banking and finance-related amendments should get a boost.
The Pension Fund Regulatory and Development Authority Bill, 2005 focuses on establishment of a Pension Fund Authority, marks a shift from defined benefit to defined contribution concept; seeks to privatise pensions through pension fund managers (only mutual funds).
The Banking Regulation (Amendment) Bill, 2005 seeks to include regulating acquisition of shares in banking companies and making voting rights of investors in private sector banks commensurate to shareholding.
Apart from this the commerce ministry is already planning a eGoM meeting for SEZs land acquisition which is highly unlikely to sail through in its current form 6-8 months ahead of the General Elections.
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Published by Sunil K @ 10:31 PM IST.
Historical BSE Sensex Returns - From 1985 to 2008 YoY
Sunday, July 20, 2008
We present one of the best data sets to our readers. We are probably the first one to publish BSE Sensex Historical P/E Graph from 1990 to 2008.In continued quest to educate the Indian investor, a table containing historical returns of BSE Sensex between 1985 to 2008 is being presented. The dataset contains returns of BSE Sensex in the first and second half of respective year followed by full year returns.
Based on the data compiled in the table above, Rs 100 invested in BSE Sensex in 1985 would be ~Rs 3,500 today [~16% compounded returns]. At the peak, Jan-08, your investment was worth Rs 5,300 [~18.5% compounded returns]. Returns from individual stocks could be much higher. As an investor have you been able to beat these returns in any other asset class ? Feel free to post a comment detailing your investment.
Data Courtesy - Bloomberg.
Labels: Returns-India-StockMarket
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Published by Sunil K @ 7:06 AM IST.
RIL arbitration against RCom - Ambani Brothers Corporate Battle to Intensify
Thursday, July 17, 2008
Reliance Industries (RIL) led by the elder Ambani bother Mukesh has initiated arbitration proceedings against Reliance Communications (RCom), the company led by the younger brother Anil.RIL has nominated Justice B P Jeevan Reddy as arbitrator for disputes with RCom, which is in talks with the South African telecom giant MTN for a merger deal.
RCOM and MTN were negotiating a possible deal that could create a $70-billion entity. However, RIL claimed that it holds the right of first refusal for a majority holding in the ADA group company and threatened legal action in case its rights were violated.
Why Mukesh wants to Block RCom-MTN Deal:
RCom will have a comparable EBITDA to RIL if not more than RIL, once Rcom and MTN are merged. An unspoken rule in the Ambani clan is they have to be India's First Business Man and hence this race. [Recall what happened when Azin Premji overthrown Dhirubhai Ambani in 2000 ?]
What's Happening in the Backdoor ?
Anil Ambani's friends in Politics came to his aide at the right time. We learn from our Political Analysts that Mukesh was called to Delhi by Mr. Singh [SP] to tell him of the consequences if he blocked Anil's Telecom deal by imposing windfall profit on RIL and get RPL under the tax net [currently enjoys EOU status]
However, Mukesh's arbitration proceedings against Anil tells that the corporate battle is going to intensify. Who knows GSM players in COAI may already be backing Mukesh Ambani since Anil is influencing a lot in the Power corridors of Delhi through his aides. Your Views ?
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Published by Webmaster @ 10:58 PM IST.
India's Local Currency Outlook Negative - Fitch
Tuesday, July 15, 2008
Breaking News:Fitch Ratings jus minutes ago revised the Outlook on the Republic of India's Long-term local currency Issuer Default Rating (IDR) to Negative from Stable, while affirming the rating at 'BBB-' (BBB minus).James McCormack, Head of Asia Sovereign ratings said,
The revision to the local currency Outlook is based on a considerable deterioration in the central government's fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget.Future rating actions with respect to India's local currency rating will depend largely on whether the FY09 fiscal slippage is reversed. Overall the macro is seen heading into Troubled Water.
We expect the RBI to hike limits on external commercial borrowings corporates can bring in (now US$50-100mn pa) mainly to supports the INR and help industrial capex. Further, the RBI may want to hoard fx reserves as insurance cover against "global uncertainties". The RBI in the past has preferred to sacrifice the INR rather
than sell fx in bouts of volatility.
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Published by Webmaster @ 12:06 PM IST.
Inflation to touch 17%. Repo Rate 11% - Barclays Research
Saturday, July 12, 2008
In a somewhat bearish view on India, Barclay Capital research is forecasting the Indian Inflation to hit 17% by Sept-2008 and will continue to stay in Double Digits until May-2009. Well, current Indian inflation could be hovering around 13% with the Indian Government understating it and revising it in retrospect every week.Barclays forecast repo rate [the rate at which RBI lends to other Banks] hike by 250 bps from current 8.5% and is likely to touch 11% by end of 2008. CRR is estimated to go up from 8.75% to 10.5%.
The USD is expected to touch Rs 44 within few weeks and may hit a high of Rs 46 within the next 6 months. If there is pressure on the INR to depreciate against the USD, Barclays is of the view that RBI will not cap USD/INR at a particular level.
Rise in the price of the Indian crude oil basket to USD145-150/bbl from the current USD132/bbl coupled with global financial turmoil and downgrade of Indian sovereign rating is the big trigger.
It was a gloomy report to read this morning. So if these estimates were to come true, then don't expect a market recovery anytime within the next 12 months.
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Published by Komal M @ 9:01 AM IST.
Rising Inflation + Falling Industrial Production Worries Investors
Friday, July 11, 2008
Inflation, as measured by the Wholesale Price Index, rose to 11.89% for the week ending Jun 28 vs. 11.63% last week and 4.42% a year ago. Component wise, primary articles were up 10.8%; manufactured products were up 10.6%, fuel price index was up 16.3%. Like the past, the price index of iron-ore is up +46%, basic metals +22%, manufactured food products +16.7%, chemicals +9.5% and textiles +5.8%, and the continued uptrend in industrial fuels.Upward revisions to the index continued like in the past, with the May 3 data being revised up 90bps from 7.83% to 8.73%. Kindly note that the Government seems to be suppressing the facts giving tailored numbers and then revising it in retrospect. Only a good monsoon can save the Indian economy now.
May 08 Industrial Production:
Industrial Production growth slowed to 3.8% vs. 10.6% last May. On a cumulative basis, growth during April-May 2009 has halved to 5% from 10.9% levels seen last year. On a sectoral basis, 11 of the 17 industry groups posted positive growth. Trends in beverages, and tobacco remained strong (+31.1%yoy in May08), several groups posted negative growth - manufactured food products (-8.6%), jute and fibre textiles (-9%), wood products (-31%) and rubber /plastic /petro products (-10.4%) and metal products (-4.9%).
According to RBI sources, real inflation maybe around 13%. Given that supply-side measures are not helping, it appears that little can be done other than tempering demand by raising rates. However, Corporate India is in better shape and work in the making is unlikely to be stopped.
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Published by Webmaster @ 4:31 PM IST.
Pharma CRAMS Research in India
Wednesday, July 09, 2008
Indian Pharma companies are now moving up the value chain with the ultimate goal to become global R&D hubs in-line with the Governmnet's vision to make India a Global Knowledge Center. Leading Pharmaceutical Companies in CRAMs (Contract Research and Manufacturing Services) segment - Biocon, Dishman Pharmaceuticals, Jubilant Organosys and Piramal Healthcare. In the current scenario, the outlook for CRAMs companies remain robust as the R&D productivity of global pharmaceutical companies is constantly declining and ever increasing costs for discovering new molecules, will force these companies to reduce costs and improve productivity. Consequently they are forced to shift some of their manufacturing activity to the low cost labour intensive countries like India which offer both quality and cost advantage.
Various Research including that of KPMG indicate that the global opportunity in Contract Manufacturing and Research are pegged at ~USD 21 bn and at ~USD 14 bn, respectively.
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Published by Komal M @ 11:12 AM IST.
Indian Macro under Pressure - Capital Goods Downgraded
Monday, July 07, 2008
The Indian Macro is slowly cracking due to rising crude oil, inflation and interest rates. One of the first sectors to feel the pinch is "Capital Goods". Brokerage Houses have downgraded the earnings estimates and target prices of all the stocks. We are presenting the same here. BEML, Crompton and Thermax have been downgraded to Neutral from Outperformer rating. Cummins has been downgraded to Underperformer.
Revised FY09 EPS[e] and Earnings Target are as follows.
ABB - Rs 29 and Rs 1,000
BEML - Rs 55 and Rs 785
BHEL - Rs 59 and Rs 1,800
Cummins - Rs 14 and Rs 202
L&T - Rs 73 and Rs 2,700
Punj Lloyd - Rs 10.8 and Rs 300
Siemens - Rs 21.3 and Rs 432
Thermax - Rs 25 and Rs 425
Voltas- Rs 6.8 and Rs 158
However, post Q1FY-09 results we will have clear visibility if the management guides correctly :-)
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Published by Webmaster @ 8:01 PM IST.
Great Eastern Shipping - Initiating Coverage
Friday, July 04, 2008
SBI Caps Securities has initiated coverage on Great Eastern Shipping Co Ltd with a BUY rating. GE Shipping possesses a sizeable fleet with presence in carrying crude oil, products and dry bulk segments. Great Ship India, a subsidiary of GE Shipping is aggressively scaling up its offshore fleet. It plans to expand its fleet size from 3 vessels in FY 2007 to 20 vessels by FY 2010E.GE Shipping has an exceptional track record in managing its fleet effectively thereby insulating itself from the cyclical business risks. In FY 2008 it has deployed 58 percent of its fleet in spot compared to 55 percent in FY 2007 because of the bullish freight rates in spot. Overall, Shipping industry to balloon as there is a rise in global trade.
The company is expected to report an EPS of Rs 104.40 and Rs 111.92 for FY09 and FY10 respectively. SBI Caps has set a Price target of 493 INR, which averages the price arrived through the EV/EBITDA, P/E, P/BVPS, P/NAV and M.cap/Revenue model for both global average and GE Shipping average.
DalalStreet.Biz Opinion: We are neutral on the stock and advice investors not to rush but ADD / BUY only on corrections.
Related Coverage: ABG Shipyard.
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Published by Webmaster @ 7:00 PM IST.
Indian Markets - Short Term Pain, Long Term Gain
The Indian market has corrected by a whopping 35% since the Jan-08 highs, one of the biggest drops in Asia and Emerging Markets. Inflation is at a 13-year high and fiscal deficit pressures have overshadowed fears of a US recession and a drop in global risk appetite.
Corporate performance continues to surprise on the upside, with headline growth at a robust 21%. After the recent 75bps rate hike, we do not rule out further hikes. In addition, oil payments are pressuring liquidity, and could also push up rates further.Advance tax figures were good if not superior.
The Indian market now trades at a P/E of 13.5x (P/B of 3x) for FY09E, well below an 18-year average of 15.5x and level with Asian peers.After four years of economic growth of 9%+, we expect a slowing to ~7+% going forward. Maintain focus on Large Caps and stocks with good quality earnings. Telecom, IT Services, Energy and Pharma are likely to be market-performers while Capital Goods [includes Infrastructure] and Autos will remain sluggish. Real Estate and Utilities are likely under performers.
Investors can ADD good quality stocks on Decline. We advise caution to risky sectors like Real Estate.
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Published by Komal M @ 11:11 AM IST.
DLF on a Buy Back Saga to Boost Stock Price
Thursday, July 03, 2008
DLF Ltd the company which has cheated its old investors and is not very professional in management now feels that its stock price is below its intrinsic value and wants to BUY Back its own stock. Mr. K.P.Singh, welcome to the real world - Dalal Street. On Dalal Street, only folks who create wealth and who help the nation grow its economy have respect, not Land Lords who just want to make money by virtue of Land Holdings. On this street everybody knows how Realtors made money and hence this carnage on your stock.
Considering minimum requirement of 10% to stay listed, the company can buy 1.8%, which on the current market cap implies ~Rs 1,800 crore outgo. It has March 08 net gearing of 50% (Rs ~10,000 cr net debt). The company plans to fund the buyback using internal accruals, which is quite feasible.
However, as per company law, we believe that DLF will be constrained from issuing fresh equity for a period of six months (from the closure date of the buyback).
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Published by Webmaster @ 7:44 PM IST.
Year to Date Performance of Indian Indices
Wednesday, July 02, 2008
The markets have crashed as if there is no tomorrow. The Government which failed to curb inflation and Industrial lobbies [Iron, Cement etc] is continuing with the Nuclear deal saga forcing political instability and a havoc in the Indian markets. The worst performing sectors on Indian bourses are Real Estate, Power, Small Caps and Capital Goods. Healthcare, FMCG and IT have come to aid the defensive investors. Here is a YTD performance of Various Indices. | Index | 01/01/08 | 27-06-2008 | % Chg |
| Realty Index | 13037.89 | 4875.25 | -62.61 |
| Power Index | 4647.66 | 2335.26 | -49.75 |
| Smallcap Index | 13703.07 | 6938.07 | -49.37 |
| Capital Goods | 19747.8 | 10442.14 | -47.12 |
| Consumer Durable | 6897.19 | 3649.33 | -47.09 |
| Bankex | 11510.31 | 6125.95 | -46.78 |
| PSU | 10633.48 | 5821.62 | -45.25 |
| Midcap Index | 9935.03 | 5558.75 | -44.05 |
| BSE 500 | 8660.63 | 5367.19 | -38.03 |
| BSE 200 | 2672.81 | 1691.44 | -36.72 |
| BSE 100 | 11206.64 | 7228.84 | -35.5 |
| Auto | 5716.49 | 3689.92 | -35.45 |
| Metal | 20061.49 | 13292.45 | -33.74 |
| S&P CNX NIFTY | 6144.35 | 4136.65 | -32.68 |
| Sensitive Index | 20300.71 | 13802.22 | -32.01 |
| Oil & Gas | 13280.88 | 9387.63 | -29.31 |
| Tech | 3973.32 | 3093.63 | -22.14 |
| FMCG Sector | 2375.07 | 2073.15 | -12.71 |
| IT | 4471.48 | 4004.75 | -10.44 |
| Healthcare Sector | 4411.54 | 4150.05 | -5.93 |
You can also see the list of stocks that have lost value between 20% to 95%.
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Published by Webmaster @ 10:17 AM IST.