SEBI – IRDA – Finance Minsitry – Total Disconnect

The Pillars of Indian Capital Market – SEBI, IRDA and the Supreme Veto Authority, the Finance Ministry are somewhat disconnected in their recent actions and functioning.

It all began with Mr. C.B.Bhave the Chairman of SEBI tightening the rules for errant Agents / brokers in the Mutual Funds and Insurance industry. Since AMFI, the body overlooking Mutual Funds was meek, SEBI overpowered and to an extent cleaned the mess of funds churning and underhand commissions AMCs were rolling out at the cost of investors. SEBI introduced a regime of Zero entry load, a good move. However, recent implementation of compulsory KYC is uncalled for as the systems that approve KYC reject an application if there is a single mis-match of a “letter” anywhere in your address putting investors at loss. Standardize PAN card for now is our opinion.

Mr. Bhave knows the Day Light Loot Insurance Agents have been resorting to by ripping commissions as high as 20% on ULIP Policies. Read more

Earnings Hit High – Heading Higher – Morgan

The earnings season looked tepid – but the headline numbers hide the underlying strength. For example, excluding ONGC, Bharti and RCom, Sensex earnings were up 36%, its best performance in four years. The quality of earnings was also quite strong – net financial income’s share in pre-tax earnings fell to a near 8-year low.

Earnings growth in the broad market (3,038 companies) slowed down (as expected), though it was particularly damaged by the
energy sector (ex-energy growth was at 22%). Earnings at the aggregate level appeared to be in line with expectations — though Read more

India Results Season So Far – Valuations + Earnings

We are in a situation where earnings risk and valuation risk seem to be prevailing simultaneously. Large cap stocks in most sectors appear fully valued and the market is trading close to top of its trading range. Simultaneously, Sensex EPS estimates have declined 2-3% during the recent quarterly result season.

The narrow market (i.e., BSE Sensex) is lagging the broad market on profit growth. Slightly more than half of the reported companies Read more

India Strategy – Market Vs Analysts

The Indian Equity market has reacted nonchalantly to a tepid earnings season, especially with the larger companies tending to disappoint on earnings. While inflation is a concern, the market seems to hold the view that the pressures will recede, and hence that India’s premium multiples will continue.

Morgan Stanley has crunched some historical data and come up with the theory of – Value at Risk. (VAR) – represents the weekly Read more

Dr Reddy’s Labs – In need of Vitamins

Dr. Reddy’s Laboratories’ (DRRD) Q1FY11 results were below estimates, with operating profit of INR 2.6 bn vs. our estimate of INR 3.1 bn. While operating margins were flat Q-o-Q (ex-restructuring costs in Q4FY10) and fixed costs of INR 6.3 bn broadly in line with estimates, a lower-than-expected sales of INR 16.8 bn led to operating margins of 15.6% (below our estimate of 17.2%). Adjusted net profit of INR 2.3 bn (excluding INR 225 mn forex loss primarily from rouble depreciation) was 8% lower than our estimate of INR 2.5 bn. This Read more

FII Survey for Investments in India

Large Institutional Investors continue to be bullish on growth and worried about inflation. Buy-side earnings expectations are in line with the sell side. Investors expect modest rate hikes totaling to 50bp for the rest of the year and almost unchanged 10-year bond yields. The Sensex is expected to close the year 10% higher from current levels, although it may hit an intra-year high of around 19,500. About two-thirds of the surveyed investors expect India to continue to outperform emerging markets in 2010 and about half of them are overweight India in their portfolios. Read more

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