Market Rally on Rate Cut Expectations – Will Earnings Follow ?

With the the fall in global commodity prices over the past month, investors have been adding to their positions in India. Majority of investors were slightly overweight India.

Rate cut the Only Silver Lining
The current rally in the market could be attributed as investors position themselves for a faster than consensus rate cut led by (a) inflation falling faster than expected. The WPI data today at just under 5% has borne out this view (b) falling oil and gold prices helping ease the current account deficit worries (c) expectations that the change of RBI Governor would lead to faster rate cuts. Our analysis indicates that there is no clear Read more

BoFA Merrill Downgrades FY 2014 Sensex Earnings Estimates

It is important that we always tick to the fundamentals of Investing – Earnings. Markets tend to rise / overshoot based on surplus liquidity in other parts of world chasing growth stocks. Now what happens when their is no Growth ? Investors Chase Value. In this backdrop and the severe paralysis on the Reforms front by a massively corrupt UPA Government squandering tax payers money on social causes for vote bank, Indian companies are expected to grow lower than expectations in FY 2014.

FY 2014 Earnings Expectations of SENSEX
The earnings Expectations of Sensex for FY 2014 from various Research entities in Jan / Feb 2013 is as follows, Read more

Stock Picking – Back to Fundamentals

We’ll shortly write an in depth research on the Indian Equity Strategy and the way forwards. However, until then since the market has substantially corrected, rejig your portfolio on the basis of Quality of the Stock.

Equity Stock Picking has changed from Momentum and Growth back to Fundamentals. Buying stocks of companies with high FCF, high ROE, low debt, low beta and low capex to depreciation has Read more

Goldman Sachs Upgrades India to Overweight NIFTY Target 7000

Global Institutional Investor and Mover and shaker of the Indian Market, Goldman Sachs has upgraded India to OVERWEIGHT in a report released just a while ago. GS likes Indian equities on both a 3 and 12-month basis.

The increase in corporate tax surcharge in the Union Budget would potentially have muted impact on overall earnings. The 130 bp hike in corporate taxes would potentially lower aggregate EPS by only 2%. Earnings revisions and sentiment have been weak lately, but we expect the cycle to improve.

India currently trades at 13.4x forward 12-month P/E and 2.6x book value. Relative to the rest of region, India is also Read more

Railway Budget – Neither Reformist Nor Populist

A significant pent-up expectation had developed on the eve of the Rail Budget FY14. But we find the budget wanting in a number of areas like rolling stock capex and track-capex allocation (adjusted for DFC and MTP projects). Resource generation will again fall on freight segment which will bear the brunt of hike (~5%) and extra-budgetary support as passenger fares are untouched.

The ministry taking cognizance of a serious shortfall of resources gave resource generation its focus with implementation of Fuel Adjustment Component (FAC) for freight transport. We believe this is a weak attempt to balance the revenue skew, as it was not passed on to the passenger fares which Read more

Do care about CARE Ratings Stock – Poised for Re-Rating

CARE Ratings is India’s second-largest credit rating firm in terms of ratings income for FY12. CARE’s total income and profit after tax CAGR during FY08-12 were 41% and 44.3%, respectively. RoE was 30.7% in FY12, and we see it in the high 20s for the next three years.

The key drivers for the CARE’s Revenues are – 1) India’s macroeconomic Read more

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