Real Estate players in India have to look-up the US market to see the fallacy of their build-up plans. The US Economy is in doldrums and it is simply stupid to build million dollar homes for the "yuppies" which expect their host tech names do well in a dwindling and grim scenario. Furthermore, the 300 mn middle class in India is as non-existent as KP's 300 mn eye-balls in the dot-com era 8 years ago. This sector will self-destruct-just wait and see it happen.
Like spring flowers, the "For Sale" signs are sprouting in front yards all over the country. But anxious sellers are facing the most brutal environment in decades, with a slumping economy, falling home prices and rising mortgage foreclosures.
And even the faint promise of better days ahead might not come true, given all the headwinds the housing industry is facing at the moment.
"This is going to be another difficult spring," said Mark Zandi, chief economist at Moody's (nyse: MCO - news - people ) Economy.com. "I think we are at the beginning of the end of the housing downturn, but it is going to be a long and painful end."
The devastation is certainly a far cry from the boom years from 2001 to 2005 when sales of new and existing homes were setting records for five straight years. During that time, home prices were soaring, luring thousands of investors into the market, hoping to buy homes and flip them for quick profit.
But since 2006, the country has been mired in a housing bust which, in many ways, is the worst since World War II. Construction is expected to drop to the slowest pace since the 1940s and prices are expected to decline by the largest amount since the Great Depression.
Hardest hit are the states where sales boomed the most: California, Florida, Nevada, Arizona and parts of the Northeast. In the Midwest, the problem is shrinking jobs in the auto industry, making homes hard to sell. But virtually all of the country has felt the aftershocks of the housing slump, either through weaker home sales or the massive drag housing has imposed on the overall economy.
Housing has shaved more than a full percentage point off economic growth, trimming the gross domestic product for the past two quarters to a barely discernible 0.6 percent rate and raising the threat that the country could topple into a full-blown recession.
The National Association of Realtors reported that 46 states saw sales decline in the first three months of this year compared with the same period in 2007. Two-thirds of 149 metropolitan areas saw prices decline during the same period, the largest percentage of cities reporting price drops in the history of the NAR survey, which goes back to 1979.
The state with the biggest sales decline was Maryland, with sales down 38.6 percent in the first three months of this year compared with the same period in 2007. The drop nationwide was 22.2 percent. The price decline nationally was 7.7 percent in the first quarter, with the biggest plunge a 29.2 percent decline in the Sacramento, Calif., area.
As the spring sales season got under way, the slump was continuing. The Realtors reported Friday that existing home sales fell 1 percent in April, the eighth drop in the past nine months, with the median home price falling 8 percent compared with a year ago, the second-biggest drop on record.
So just how much worse will things get?
Lawrence Yun, chief economist for the Realtors, sees some hopeful signs. Some parts of the country that have been hammered with sharp declines in sales and prices, such as San Diego, Calif., and Fort Myers, Fla., are now reporting sales increases, as buyers are being lured back into the market, looking for bargains.
"Lower prices and low interest rates are starting to generate results," Yun said, noting that 30-year fixed-rate mortgages averaged 5.92 percent in April, down from 6.18 percent in April 2007. That reflected an aggressive rate-cutting effort by the Federal Reserve to try to keep the country out of a recession.
Sales should also be helped in coming months, Yun predicted, by the reappearance of more mortgage products as lenders reopen the tap for certain loans. That supply had been closed following the credit crisis that hit last August, triggered by rising defaults in subprime mortgages.
Other economists are not so optimistic, noting that the Realtors' latest report showed the number of unsold single-family homes jumping to a 23-year high, reflecting, in part, a rising tide of mortgage foreclosures, which are dumping more homes on an already glutted market.
Adding to the foreclosure problem is the weak economy, which has resulted in four straight months of job layoffs, an indication to some analysts that the country has already fallen into a recession.
Rising job layoffs and higher gasoline and food prices have sent consumer confidence plunging - not a great environment to mount a rebound in housing.
And then there is the problem of the huge overhang of unsold homes generating further declines in prices, which seem to be keeping more prospective buyers on the fence.
"Right now a lot of people are staying away because they don't want to buy an asset that might lose value right away," said Patrick Newport, an economist at Global Insight.
Newport predicted that prices, which by some measures have fallen by about 15 percent nationwide from their peak two years ago, will decline another 10 percent before bottoming out in the spring of 2009. A 25 percent fall in prices would be the biggest since home prices plunged by about one-third during the Great Depression of the 1930s.
David Seiders, chief economist for the National Association of Home Builders, said he believed sales will bottom out by the middle of this year and then start to move higher by the end of this year.
He said builders, trying to control inventories, will continue slashing production, with housing starts expected to drop by 39 percent this year following a 30 percent decline in 2007. That will push activity to the slowest annual pace since the end of World War II. Seiders predicted a gradual rebound in construction starting next year.
"This is stacking up as the most dramatic housing contraction in the post-World War II period," he said. And while sales, construction and prices should all start to recover by next year, the rebound is not expected to be a rapid one. Some analysts are forecasting it will take a couple of years for housing to regain its footing.
"It is going to take some time first to restore confidence that housing is a reasonably OK investment, then to work off this inventory and then for the financial system to revive," Zandi predicted".
Nothing in this article is, or should be construed as, investment advice.
Rohit
Tuesday, May 27, 2008
Technically Speaking-Nifty 4400, Sensex 14700 By Thursday May 29, 20
Stocks at major risk: Reliance, Ongc, DLF, LNT and NTPC
Probability for Nifty: 4400 on Expiry.
Probability for Sensex : 14700 on FNO Expiry
Last week I marked drop to 0-b line as an "x" wave and said
"Technically, 'a' of second corrective should move above the top of the first
corrective, which was at 17735 … we'll see if the current "a" of second
corrective can cross above 17735 as per assumptions, and configure the second
corrective accordingly from thereon."
Sensex, however, failed to cross the top of first corrective, and reacted from
80% correction level to previous fall. Nifty reacted from 61.8% correction
level. Rejecting any positive expectation, Index had lost as much as 785 points
or 4.5% by the end of the week. Banks and Realty lost more, about 8% and 7%
respectively.
Index is now testing its previous lows. This support area is from 16626
(Friday's low as well as low of 14th May) to 16452 (previous high). Some effort
to hold these lows may not be ruled out.
However, a decisive break below this area, especially with a sustainable
gap-down that creates a Weekly downward gap, would seek severe downsides. Such a
move would result in weakened structure, with confirmed lower bottom after lower
top formation after 17735. Once the Index sets itself below the support area at
16452-626, we may see downsides up to 15300.
Wave-count wise, previously I had marked an "x" at the lower channel. Holding
the support area at 16452-16626 could configure the second corrective as an
ending Triangle, which is allowed to get developed outside the channel.
However, a strong break below 16452 would compel me to reject the "x" label
altogether, and mark end of "d" or "x" at 17735. This would mean a fresh
down-move beginning from 17735. In such case, "d" or "x" ended as a as a normal
Zigzag, and either "e" of Triangle or "a" of second corrective (after "x") has
opened downwards.
As for the larger label whether the up-move from 14677 is an "x" or "d", label
of "x" is "less likely" because it configured as a Zigzag, against the first
corrective which was also a Zigzag. Remember, "x" usually alternates with the
first corrective. Therefore, if the first corrective is a Zigzag, then "x" has
to configure as a Flat or a Triangle.
My initial thoughts, therefore, support "d" label at 17735, suggesting "e" leg
has opened downwards if support area breaks.
As an added confirmation, we'll watch 15300 level on downside, which could help
us differentiate between the two. If it is an "e" wave, then it would probably
hold the 15300 level.
Below 15300, the move would become part of the second corrective, which would
then break even 14677, with market going into a protracted bear phase lasting at
least 13 months from 'Jan'08 top, following the 8-year cycle, explained
separately.
I had also said that "… no matter whether this upward wave is an "x" or "d", so
long as it terminates below 18250 level, Sensex will be in danger to fall into
8-year cycle. Below this level (i.e. 18250), the current rally will remain
smaller than the previous rally from 15332 to 18895, which had measured 3563
points.
Only above 18250, however, this rally would have become larger than the previous
rally, which as per my calculations, would save us from falling into the
much-feared 8-year cycle. Why ? Because beyond 18240, it would bring in
"Principle of Extraction" in action, which displays drops getting smaller, and
rallies getting bigger, within the corrective phase starting 'Jan08. This would
have led to creation of positive structure required to end the corrective phase
as per the May'Bottom cycle. Remember, the second drop (from 18895 to 14677) was
already smaller than the first drop (from 21206 to 15332).
On Nifty chart, the equivalent to 14677 bottom was higher than its Jan'low. It
was 4468, against 'Jan low of 4448. This also favors a triangular structure,
rather than a Zigzag + X since 'Jan'High. Whether the structure would be a
"Normal Contracting Triangle" or "Extracting Triangle" would depend on whether
"d" turns out to be bigger than "b" leg or not. In both cases, I had said, "'e'
leg downwards will still be pending."
The May-Bottom Cycle
The bull-phase from '2003 to '2008 phase had continued for over four years,
wherein Sensex multiplied 7 times from 2904 (May'03) to 21206 (Jan'08).
Cycle studies indicate Sensex' tendency to hit a high in the first quarter every
year during this bull run, and low near every May. Since we already have an
important top in 'Jan this year, we are looking forward for a bottom by Apr-May
in line with this cycle study.
The 8-Year Cycle
A much bigger cycle is the 8-year cycle. As shown on the chart below, '1984 was
the beginning of 8-year long bull-run till '1992. In my Super-Cycle Degree
count, shown on ASA Long-Term chart under a separate para, I have, in fact,
taken '1984 as the beginning point for the most dynamic 3rd wave.
The next two important turning points occurred exactly 8 years thereafter, in
'1992 and '2000. Both these turning points were marked by stock market scams,
wherein the leaders of the rally had extremely difficult time later. For
example, ACC, the leading stock of '1992 bull market, remained below its highs
till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally,
had lost as much as 90% of their top valuations by the year '2003.
This year, we are sitting on this very important cycle, which therefore, may
throw up similar possibilities.
Weekly channels
The following channels shown on the Weekly chart have guided the Sensex
movements almost exactly.
The 'Jan low at 15332 was made near the lowest channel line. Recently this line
has also been broken. The recent rally appeared like a pull-back to the channel
just broken.
Remember, all of these channels were drawn over a year ago.
Alternative scenarios for Sensex
As far as larger wave scenario is concerned, I have been explaining two
alternatives :
The first one assumes that a large Triple Combination corrective, beginning
Sep'1994 got over in Oct'2005 at 7656. The last corrective within this Complex
Corrective phase formed as a "Non-Limiting" Running Triangle, the breakout from
which has already occurred. This has been my preferred scenario for many years.
(Remember, Non-limiting Triangles, as the name suggests, do not impose any limit
on the post-pattern behavior).
This scenario also combines well with the traditional channeling technique.
Sensex followed a parallel channel for 11 long years from Apr'1992 to May'2003.
As I had shown, if one projects the width of this channel on upper side, such a
projection gave 20000 as the "minimum" target for Sensex. The same has been
achieved already.
As per the alternative bearish scenario, a Diametric had been developing into
Sensex' 5th leg of impulse. In this alternative, the 4th wave ended at May'2003
low near 2904. The 5th leg, being a non-extended wave of the Impulse, should not
have gone much beyond 61.8% ratio to the 3rd, which projected a maximum of
13300. In this argument, the 5th wave was assumed to be the "non-extended" leg
within the Super-cycle degree 3rd which began at 259 in Nov'1984 as shown below.
(in an Impulse pattern, only one directional leg can be the extended leg.) As
per this wave-structure, the 3rd (of the 3rd) was shown to be the extended leg,
which achieved exactly 261.8% ratio to the 1st on log scale. The 2nd was exactly
61.8% of 1st value-wise, and 161.8% time-wise. The 4th was 38.2% of 3rd
value-wise, and 261.8% time-wise, as shown below.
There are good ratios present within different waves, as explained on the chart,
to support this scenario. However, the Sensex sustaining well above 13300 may
lead to a "Double Extension" scenario even by this alternative, wherein both 3rd
as well as 5th would be extended waves.
The development into 5th wave was read as a "Diametric" formation. It was
explained that the well-channeled legs, with a subsequent correction of less
than 61.8%, led to the suspicion of a "Diametric" formation. (Remember,
channeled moves usually indicate complex correctives, which should normally get
retraced by more than 61.8%, except within the new pattern called "Diametric").
Diametric formation has 7 legs, marked as a-b-c-d-e-f-g. It is called a
"Diametric" because it combines two Triangular patterns, one initially
Contracting up to the "d" leg, followed by an Expanding one, thereafter. The
contraction point is the "d" leg, and the legs on either sides of it tend to be
equal. Accordingly, "c" and "e" were equal in "log scale", both showing about
60% gain. Similarly, "g" achieved equality to "a", both showing about 115% gain.
This Diametric could be taken as the 1st of the 5th (5th, which, due to its
corrective structure, could be developing as a Terminal wave). This Diametric in
the 1st leg of probable Terminal wave appears to have ended at 'Jan'08, and we
may be looking at the 2nd wave downwards within this Terminal.
.
The "Double Extension" scenario was also been shown below using ASA Adjusted
Long-term Index chart. I've created this chart combining Index figures compiled
by a British advisor (from '1938 to '1945), RBI Index figures ('1945 to '1969),
F.E Index ('1969 to '1980) and Sensex (thereafter till date).
The chart shows the Super-Cycle-Degree count that I had been presenting since
many years ago. The labeling shows that the market is into the 5th of the
SC-degree 3rd wave. This 5th leg (within SC degree 3rd) may have begun either
from 2904 (May'2003) or from 7656 (Oct'05). In case of the "Double Extension"
scenario turns out to be true, Sensex could be projected to achieve even 50000+.
Technical Analysis - Stocks
Change of Polarity Principle
Previously, on 3rd March'08, I had explained "Change of Polarity Principle",
where previous lows turn into resistance.
I had examined the following five major heavyweights showing this principle,
marking their change of polarity at respective previous lows.
Even after two months, these resistances still keep these major stocks under
pressure, indicating power of this technical principle.
1. Reliance : Showed hesitation at previous low of 2654
2. ONGC : Failed to cross 1115, weakened to test 'Jan lows
3.NTPC : Failed to even reach 225, in fact reacted from 210 level shown as
lower resistance
4. DLF : Failed to reach 905, created fresh change of polarity at 'Jan low
of 740
5. L & T : Created fresh change of polarity at 3204
Nothing in this article is, or should be construed as, investment advice.
Rohit
Probability for Nifty: 4400 on Expiry.
Probability for Sensex : 14700 on FNO Expiry
Last week I marked drop to 0-b line as an "x" wave and said
"Technically, 'a' of second corrective should move above the top of the first
corrective, which was at 17735 … we'll see if the current "a" of second
corrective can cross above 17735 as per assumptions, and configure the second
corrective accordingly from thereon."
Sensex, however, failed to cross the top of first corrective, and reacted from
80% correction level to previous fall. Nifty reacted from 61.8% correction
level. Rejecting any positive expectation, Index had lost as much as 785 points
or 4.5% by the end of the week. Banks and Realty lost more, about 8% and 7%
respectively.
Index is now testing its previous lows. This support area is from 16626
(Friday's low as well as low of 14th May) to 16452 (previous high). Some effort
to hold these lows may not be ruled out.
However, a decisive break below this area, especially with a sustainable
gap-down that creates a Weekly downward gap, would seek severe downsides. Such a
move would result in weakened structure, with confirmed lower bottom after lower
top formation after 17735. Once the Index sets itself below the support area at
16452-626, we may see downsides up to 15300.
Wave-count wise, previously I had marked an "x" at the lower channel. Holding
the support area at 16452-16626 could configure the second corrective as an
ending Triangle, which is allowed to get developed outside the channel.
However, a strong break below 16452 would compel me to reject the "x" label
altogether, and mark end of "d" or "x" at 17735. This would mean a fresh
down-move beginning from 17735. In such case, "d" or "x" ended as a as a normal
Zigzag, and either "e" of Triangle or "a" of second corrective (after "x") has
opened downwards.
As for the larger label whether the up-move from 14677 is an "x" or "d", label
of "x" is "less likely" because it configured as a Zigzag, against the first
corrective which was also a Zigzag. Remember, "x" usually alternates with the
first corrective. Therefore, if the first corrective is a Zigzag, then "x" has
to configure as a Flat or a Triangle.
My initial thoughts, therefore, support "d" label at 17735, suggesting "e" leg
has opened downwards if support area breaks.
As an added confirmation, we'll watch 15300 level on downside, which could help
us differentiate between the two. If it is an "e" wave, then it would probably
hold the 15300 level.
Below 15300, the move would become part of the second corrective, which would
then break even 14677, with market going into a protracted bear phase lasting at
least 13 months from 'Jan'08 top, following the 8-year cycle, explained
separately.
I had also said that "… no matter whether this upward wave is an "x" or "d", so
long as it terminates below 18250 level, Sensex will be in danger to fall into
8-year cycle. Below this level (i.e. 18250), the current rally will remain
smaller than the previous rally from 15332 to 18895, which had measured 3563
points.
Only above 18250, however, this rally would have become larger than the previous
rally, which as per my calculations, would save us from falling into the
much-feared 8-year cycle. Why ? Because beyond 18240, it would bring in
"Principle of Extraction" in action, which displays drops getting smaller, and
rallies getting bigger, within the corrective phase starting 'Jan08. This would
have led to creation of positive structure required to end the corrective phase
as per the May'Bottom cycle. Remember, the second drop (from 18895 to 14677) was
already smaller than the first drop (from 21206 to 15332).
On Nifty chart, the equivalent to 14677 bottom was higher than its Jan'low. It
was 4468, against 'Jan low of 4448. This also favors a triangular structure,
rather than a Zigzag + X since 'Jan'High. Whether the structure would be a
"Normal Contracting Triangle" or "Extracting Triangle" would depend on whether
"d" turns out to be bigger than "b" leg or not. In both cases, I had said, "'e'
leg downwards will still be pending."
The May-Bottom Cycle
The bull-phase from '2003 to '2008 phase had continued for over four years,
wherein Sensex multiplied 7 times from 2904 (May'03) to 21206 (Jan'08).
Cycle studies indicate Sensex' tendency to hit a high in the first quarter every
year during this bull run, and low near every May. Since we already have an
important top in 'Jan this year, we are looking forward for a bottom by Apr-May
in line with this cycle study.
The 8-Year Cycle
A much bigger cycle is the 8-year cycle. As shown on the chart below, '1984 was
the beginning of 8-year long bull-run till '1992. In my Super-Cycle Degree
count, shown on ASA Long-Term chart under a separate para, I have, in fact,
taken '1984 as the beginning point for the most dynamic 3rd wave.
The next two important turning points occurred exactly 8 years thereafter, in
'1992 and '2000. Both these turning points were marked by stock market scams,
wherein the leaders of the rally had extremely difficult time later. For
example, ACC, the leading stock of '1992 bull market, remained below its highs
till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally,
had lost as much as 90% of their top valuations by the year '2003.
This year, we are sitting on this very important cycle, which therefore, may
throw up similar possibilities.
Weekly channels
The following channels shown on the Weekly chart have guided the Sensex
movements almost exactly.
The 'Jan low at 15332 was made near the lowest channel line. Recently this line
has also been broken. The recent rally appeared like a pull-back to the channel
just broken.
Remember, all of these channels were drawn over a year ago.
Alternative scenarios for Sensex
As far as larger wave scenario is concerned, I have been explaining two
alternatives :
The first one assumes that a large Triple Combination corrective, beginning
Sep'1994 got over in Oct'2005 at 7656. The last corrective within this Complex
Corrective phase formed as a "Non-Limiting" Running Triangle, the breakout from
which has already occurred. This has been my preferred scenario for many years.
(Remember, Non-limiting Triangles, as the name suggests, do not impose any limit
on the post-pattern behavior).
This scenario also combines well with the traditional channeling technique.
Sensex followed a parallel channel for 11 long years from Apr'1992 to May'2003.
As I had shown, if one projects the width of this channel on upper side, such a
projection gave 20000 as the "minimum" target for Sensex. The same has been
achieved already.
As per the alternative bearish scenario, a Diametric had been developing into
Sensex' 5th leg of impulse. In this alternative, the 4th wave ended at May'2003
low near 2904. The 5th leg, being a non-extended wave of the Impulse, should not
have gone much beyond 61.8% ratio to the 3rd, which projected a maximum of
13300. In this argument, the 5th wave was assumed to be the "non-extended" leg
within the Super-cycle degree 3rd which began at 259 in Nov'1984 as shown below.
(in an Impulse pattern, only one directional leg can be the extended leg.) As
per this wave-structure, the 3rd (of the 3rd) was shown to be the extended leg,
which achieved exactly 261.8% ratio to the 1st on log scale. The 2nd was exactly
61.8% of 1st value-wise, and 161.8% time-wise. The 4th was 38.2% of 3rd
value-wise, and 261.8% time-wise, as shown below.
There are good ratios present within different waves, as explained on the chart,
to support this scenario. However, the Sensex sustaining well above 13300 may
lead to a "Double Extension" scenario even by this alternative, wherein both 3rd
as well as 5th would be extended waves.
The development into 5th wave was read as a "Diametric" formation. It was
explained that the well-channeled legs, with a subsequent correction of less
than 61.8%, led to the suspicion of a "Diametric" formation. (Remember,
channeled moves usually indicate complex correctives, which should normally get
retraced by more than 61.8%, except within the new pattern called "Diametric").
Diametric formation has 7 legs, marked as a-b-c-d-e-f-g. It is called a
"Diametric" because it combines two Triangular patterns, one initially
Contracting up to the "d" leg, followed by an Expanding one, thereafter. The
contraction point is the "d" leg, and the legs on either sides of it tend to be
equal. Accordingly, "c" and "e" were equal in "log scale", both showing about
60% gain. Similarly, "g" achieved equality to "a", both showing about 115% gain.
This Diametric could be taken as the 1st of the 5th (5th, which, due to its
corrective structure, could be developing as a Terminal wave). This Diametric in
the 1st leg of probable Terminal wave appears to have ended at 'Jan'08, and we
may be looking at the 2nd wave downwards within this Terminal.
.
The "Double Extension" scenario was also been shown below using ASA Adjusted
Long-term Index chart. I've created this chart combining Index figures compiled
by a British advisor (from '1938 to '1945), RBI Index figures ('1945 to '1969),
F.E Index ('1969 to '1980) and Sensex (thereafter till date).
The chart shows the Super-Cycle-Degree count that I had been presenting since
many years ago. The labeling shows that the market is into the 5th of the
SC-degree 3rd wave. This 5th leg (within SC degree 3rd) may have begun either
from 2904 (May'2003) or from 7656 (Oct'05). In case of the "Double Extension"
scenario turns out to be true, Sensex could be projected to achieve even 50000+.
Technical Analysis - Stocks
Change of Polarity Principle
Previously, on 3rd March'08, I had explained "Change of Polarity Principle",
where previous lows turn into resistance.
I had examined the following five major heavyweights showing this principle,
marking their change of polarity at respective previous lows.
Even after two months, these resistances still keep these major stocks under
pressure, indicating power of this technical principle.
1. Reliance : Showed hesitation at previous low of 2654
2. ONGC : Failed to cross 1115, weakened to test 'Jan lows
3.NTPC : Failed to even reach 225, in fact reacted from 210 level shown as
lower resistance
4. DLF : Failed to reach 905, created fresh change of polarity at 'Jan low
of 740
5. L & T : Created fresh change of polarity at 3204
Nothing in this article is, or should be construed as, investment advice.
Rohit
Mkts to see deep, long correction: Rakesh Jhunjhunwala
The question bothering the markets still remains - is there more pain left and what is the road ahead? To find out answers to these questions, CNBC-TV18’s Stocks Editor, Udayan Mukherjee caught up with ace investor and market expert Rakesh Jhunjhunwala in a special series called ‘Hunt for the Bottom’.
Jhunjhunwala feels that the markets have seen a bull-run since April 2003 and one cannot have a bull market without corrections. The corrections would be testing the investors’ patience and their sheer belief in the markets, he said. ”All the corrections we have had in the last four years have had been deep but they have not been deep time-wise. I think the real patience and the real belief in the equity and in the market comes when the market tests you time-wise. So I think this is going to be one of the deepest and the longest corrections that we are going to have, in what I believe is going to be a very long bull market,” Jhunjhunwala said.
Excerpts from Udayan Mukherjee’s conversation with Rakesh Jhujhunwala:
Q: Is the worst over, have we seen most of the pain or do you fear that there could be much more pain this time around?
A: We have not four but four-and-a half-years of bull market, which started in April 2003. Whatever be the quality and depth in the length of the bull market, you are not going to have a bull market without corrections, which are not going to test our patience and sheer belief in the market. All the corrections we have had in the last four years have been deep. They have not been deep timewise. The real patience and belief in equity markets comes when the market tests you timewise. This is going to be one of the deepest and longest corrections that we are going to have. However, this is going to be a very long bull market.
Q: In the middle of this phase, you expect to see some rallies which will get sold into as well?
A: Yes. You will surely see rallies and we are in the midst of one. Suppose the markets doesn’t exceed and the index doesn’t go 21,000 and Nifty doesn’t go above 6,200 for the next 18 months, I as an investors won’t bother it at all. I would happily rest with the kind of gain we have had for the last four-and-a half-years.
Q: It could be an 18 months rest you think?
A: Why not.
Q: Six quarters of market not going above the old high?
A: Why not.
Q: Is it a possibility or a probability according to you?
A: It’s both.
Q: You think it’s a highly likely event?
A: I believe in the long-term story. I am going to profit as an equity investor. As an investor, I don’t see a greater rate of return for my capital at any place other than the equity market. I watch the market everyday but I won’t be surprised. I am prepared for it.
Q: But you look at the screen very carefully as well and trade a bit? Is the screen reflecting any strength over the last few days?
A: A good part of the market has already bottomed. It may take time for the market to gain. In the midcap space, a lot of stocks have bottomed. But the price movement tells me that as of now, not much of the market is going to renew those.
Q: Which sectors are still vulnerable to downside? Some sectors had seen massive excesses, but stocks have also fallen 40-50-60%. Do you think enough correction has happened in those sectors or pockets or they may unwind further?
A: That’s a very difficult call to take. We have to play it scrip to scrip. It is difficult to take it sector to sector.
Q: You had concerns about spaces like real estate etc. Do you think they have corrected enough?
A: I have been a real estate stock bear and have been wrong earlier. I still feel there is space to go there.
Q: Any other clear space where lots of excesses have happened?
A: In the infrastructure sector, there is lot of excess valuations. Stocks will take time. It will take time for the excesses to wear off.
Q: You have been a big bull of that space and have had big holdings like Praj, and Punj Lloyd? Do you think there were excesses at the top in those kinds of areas as well?
A: Suddenly the valuations were quite high.
Q: But have they corrected enough after this big fall?
A: They have corrected. But for them to really gain their old highs it will take time.
Q: India has been one of the biggest underperformers in the last three months. Do you think there are local problems as well, which we need to content with over the next one year?
A: The way to tackle inflation is to increase supply. To keep interest rate high in the face of low interest rate worldwide, is a local problem. A friend of mine told me sometime back that the true bottom of this market will be made the day the election is announced, but that has been the history of our markets.
Q: Does politics present a threat to this market?
A: We have seen the worst of whatever the threat could be. I don’t think they are going to impose price controls anywhere. Also, India has grown a lot without the politicians. So, I am not afraid if Mayawati becomes Prime Minister, but I hope she will not. I think politics has done no good. If god were to grant me one wish, I would ask him to let anybody be the Prime Minister of this country, but let not that government be supported by Communists, because if you were to listen to the Communists we were to get everything free and don’t have to work for anything.
Q: Does government policy worry you? We have seen quite a bit of price control etc in the last one-month? Does it worry you significantly?
A: Not at all, because we have been hearing all this for so many years but India has trudged along. Do you think anything has changed in the last 12 years?
Q: What about steel? If I remember correctly, you bought some steel stocks earlier, didn’t you own Tata Steel?
A: Yes. I bought some steel stocks even lately. They are not going to impose any price controls. SAIL and Tata Steel are placed very well as far as government rules are concerned. If steel prices go up, they benefit because they have captive commodities.
Q: What is essentially different about what is going on now in the market and what you saw in 2001 and 1992?
A: Valuations in these times never got to 1992 levels. In 1992, we were trading at 65 times earnings, 2001 at 35-32 times earnings, and this year we peaked at 21 times maybe 2009 earnings.
Q: In some pockets like infrastructure etc we did go to 30-40 kind of P/E multiples?
A: Yes, maybe but that was not a very large part of the market. After all, the largest part of the market is the Sensex and Nifty. The bull market that started in 2003 cannot end at less than 30-35 earnings or at least 25-30 times for the index.
Q: Let me paint a bearish scenario. The bears say that interest rates go up even from here, which may not be justified. But in our country sometimes we do things which are not justified. GDP growth slows to sub-7%, earnings growth slows to 10-12%, could we have then in that kind of situation a compressed one-two year kind of a bear phase? Is that a likely scenario or even a possible scenario in your eyes?
A: 4,100-4,200 which corresponds to 12,500-13,000 on the Index is a level which we are not going to penetrate on the downward side very easily. 5,300-5,400 upside on the Nifty is a level that we will not penetrate easily. So, we could be in a 4,200 range. The range could be 4,500-5,300 instead of 4,200-5,300. We could pass a year or 18 months.
Q: Is it a good time for investors to buy stocks or do you think they won’t be rewarded in the next one-year or so?
A: I don’t think we as investors should be worried about what rewards we can get in a year. I have made the biggest money by understanding that I get the reward within a time period which is reasonable and one-year is never reasonable. If one gets good stocks at valuations which one thinks are good and feel the ultimate value of the stock will be far higher, one should buy it.
Q: How much damage has been done this time around because in our country because a very narrow section of the population invest in stocks?
A: Everybody’s portfolio is damaged, but my portfolio doubled in one-year. You went from 100-200 then, came back to 140-150 and right now are at 130-135. The increase was very severe and the fall was equally severe. I don’t think the damage has take place with those Charlie’s who came to make a fast buck. The serous investors who invested through the last four-five years have been getting very good returns.
Q: Do you think they will hold the faith, which has been seen so far in the mutual fund portfolio with no major redemptions? Do you think this whole phase will pass without significant mutual fund redemptions?
A: Why do you think these redemptions are not taking place? It’s not an act of defiance according to me. It is because may be it is supports. The amount of money that has to come to India for investing locally is far greater than what we have had. So, some people are withdrawing but every other money is going up. Prosperity is also going up. People who are running businesses are feeling the prosperity. So, may be the redemptions may not take place. It could also be that the kind of money which has come is good genuine money and not some short-term scam money.
Q: Having seen five-years of bull run and then a sharp three-month correction, do you think it is time to re-orient your investment strategy somewhat because a few things have fallen off the cliff? - Is it time to change your horses?
A: I have followed one investment strategy all my life. Good investing gives you good returns. It depends on your investment strategy. My investment methodology and strategies don’t change as markets keep changing. If I have a good stock, then it is going to give returns. One thing which supports the market is the bodyweight of solid liquidity. With these kind of high oil prices, where is all this surplus money with West Asian countries going to go?
Q: But you trade as well, do you sense that different sectors are coming back? IT has had a nice rally after a long time, They were two years out in the cold. Is it possible that some of these losers of the last couple of years could stage a comeback?
A: I am not personally so bullish on IT.
Q: You have not been for a while?
A: Yes, because they are a mature industry, all institutions own them. I think growth is going to be limited there. There are uncertainties in the principal markets. Although I have true respect and true regard for the Infosys management, I think meeting their guidance is going to be a challenge.
Q: Do you think there is a risk out there?
A: I think there is a challenge, because conditions in the US are going to get worse by the day. They are saying they expect the second quarter in the US to be better .
Q: Which is when you think the problems will start dropping in?
A: I think there will be three stages of the problem in America. First is the realisation of the subprime problem. Second, the economy will slowdown as a result. I think defaults would creep into prime housing, into credit cards and auto loans and maybe commercial real estate. I think that will be the second stage. The third stage is going to be a depression.
Q: Have you ever bought an FMCG stock in your life?
A: Yes, I have.
Q: Not Tata Tea?
A: No, not Tata Tea. I have another FMCG stock in which I own more than 5%.
Q: So, a largecap FMCG stock?
A: I won’t say largecap but fairly good company called Agro Tech Foods.
Q: But none of the ones we know like Colgate, Dabur, Marico, and Lever. You have never bought them in your life?
A: I may have bought some stocks like Colgate and sold it. I bought some shares in Lever in 2004 and sold it in 2005. I have made good money there.
Q: Have you ever been a big pharmaceutical investor?
A: I have a large investment in Lupin and made good money in Matrix. I made some small investments in Ranbaxy.
Q: Do you subscribe to the theory that capital goods or power is a sector, which was such a big leader, is on the wane and will not lead to the next rally?
A: Wane is about P/Es. Pharma P/Es are set to go up. That’s one sector which will not dip if we get a prolonged correction. If you look at some of the P/E e ratios of pharma companies, they are certainly attractive. Everybody has been so ebullient about capital goods and that’s why P/E’s are high. It will take time for earnings to catch up.
Q: What are your thoughts on oil and gas as a space? You just spoke about crude; do you think there is an oil and gas play in India from a stock market perspective?
A: Well I would Reliance is a big oil and gas play. There could be some interesting plays in the smallcaps and the midcaps.
Q: Exploration?
A: Yes, exploration.
Q: You were once a bull on Indian Oil Corporation. You lost your hope in them?
A: I will never buy them, I promise. Wherever government is involved I am going to be very careful.
Q: That's surprising coming from you because you made a lot of money from PSU companies like BEML and Bharat Electronics?
A: But at what valuations? I started buying Bharat Electronics at Rs 32, BEML at Rs 30. Also what I realized and why I sold this is that for companies to really gain at these valuations, one has got have that plus-plus. The investor has to have faith that these companies are innovative, they are going to do something new. They are going to do something different. I don't find that in the public sector. They are constrained. Indian Oil--I read Rs 450 crore is what we are losing on fuel everyday. But there are interesting opportunities in exploration. I have some investment in that sector.
Q: But they are small and midcap companies?
A: Yes.
Q: What are the chances that in 2009 you go to something much beyond the old high that you saw on the index? Do you think it is conceivable? What needs to fall into place for that to pan out?
A: America needs to go for present tense. It is important that Infosys achieves this guidance it has given. What is important to the Indian economy is the value-add that software brings. If Infosys adds 25,000 employees, it translates into 25,000 cars and 25,000 homes. Then, that in turn leads to cement and steel. It is not any small value-add. If the US grows at 4%, Indian software will grow at 40%. The sentiment of investors worldwide will be extremely bullish. If you achieve earnings of say 1,030-1,040 in March 2009, then you go to 1,200 by March 2010. So, maybe in May 2009 you are going to see a very good rise.
Q: Are you looking at 25-30 P/E multiples?
A: For that we are still 4-5 years away. We will get there.
Q: We didn’t pass it in December last year?
A: That is why the top of the bull market was not made. The top of the bull market will be made when the value of the Indian Embassy in Japan is greater than the land in Delhi. If we had continued with the real estate led bull market in December 2007 we would have reached those levels.
Q: Do you sometimes feel apprehensive with your view today that 4,200 is a bottom worst case scenario can be violated and you may be surprised?
A: If it is violated, I would surely be surprised. But welcome this correction. I don’t think it is a bear market. It is a correction because had we continued at that pace we might have reached a level where we would have damaged that market beyond repair. It will still go much further. For that to happen, we have got to have this correction.
Q: How will you approach this phase if it pans out like you expected, one year of essentially rangebound movements. From your trading and investment perspective, how will you approach it?
A: I will limit my trading extremely. My trading levels will come to 10-20% of that level. We need a rangebound markets. I don’t buy anything at one price but buy at stages.
Q: What will you trade more in the next one year the Nifty or individual stocks? Where will the opportunities be?
A: Nowadays,, I tend to trade in the Nifty more because I find it very liquid.
Q: From an investment perspective?
A: I will see whatever opportunity comes. I am making investments. I made some investments in April, March, and February.
Q: Will you consider paring down some money and moving to cash in the next one-year?
A: I essentially have no debt or very little debt. So, I can always take debt if I find investments to be adequate. If I feel that I have such a great opportunity that I must invest and I don’t have the capital, I may sell some of my investments and interchange.
Q: So, your convinced that this is just a long painful correction in a bull market. It is not a bear market that you are seeing for the last three-months?
A: That’s what I think.
Q: Convinced?
A: Yes, 100%. Once America bottoms because the greater surprise is going to come from the World Cup markets. There is so much to come from India once this gas comes. More the power, more investment is needed. This will itself be such a big trigger. I cannot believe that the bull story, which is linked to India’s economy with 5-6% of Indian’s savings coming into equity and with the kind of Indian sprit and entrepreneurship, can die. If this is the end of the bull market then India really has incurred god’s wrath. But it may be long and painful.
Rohit
Jhunjhunwala feels that the markets have seen a bull-run since April 2003 and one cannot have a bull market without corrections. The corrections would be testing the investors’ patience and their sheer belief in the markets, he said. ”All the corrections we have had in the last four years have had been deep but they have not been deep time-wise. I think the real patience and the real belief in the equity and in the market comes when the market tests you time-wise. So I think this is going to be one of the deepest and the longest corrections that we are going to have, in what I believe is going to be a very long bull market,” Jhunjhunwala said.
Excerpts from Udayan Mukherjee’s conversation with Rakesh Jhujhunwala:
Q: Is the worst over, have we seen most of the pain or do you fear that there could be much more pain this time around?
A: We have not four but four-and-a half-years of bull market, which started in April 2003. Whatever be the quality and depth in the length of the bull market, you are not going to have a bull market without corrections, which are not going to test our patience and sheer belief in the market. All the corrections we have had in the last four years have been deep. They have not been deep timewise. The real patience and belief in equity markets comes when the market tests you timewise. This is going to be one of the deepest and longest corrections that we are going to have. However, this is going to be a very long bull market.
Q: In the middle of this phase, you expect to see some rallies which will get sold into as well?
A: Yes. You will surely see rallies and we are in the midst of one. Suppose the markets doesn’t exceed and the index doesn’t go 21,000 and Nifty doesn’t go above 6,200 for the next 18 months, I as an investors won’t bother it at all. I would happily rest with the kind of gain we have had for the last four-and-a half-years.
Q: It could be an 18 months rest you think?
A: Why not.
Q: Six quarters of market not going above the old high?
A: Why not.
Q: Is it a possibility or a probability according to you?
A: It’s both.
Q: You think it’s a highly likely event?
A: I believe in the long-term story. I am going to profit as an equity investor. As an investor, I don’t see a greater rate of return for my capital at any place other than the equity market. I watch the market everyday but I won’t be surprised. I am prepared for it.
Q: But you look at the screen very carefully as well and trade a bit? Is the screen reflecting any strength over the last few days?
A: A good part of the market has already bottomed. It may take time for the market to gain. In the midcap space, a lot of stocks have bottomed. But the price movement tells me that as of now, not much of the market is going to renew those.
Q: Which sectors are still vulnerable to downside? Some sectors had seen massive excesses, but stocks have also fallen 40-50-60%. Do you think enough correction has happened in those sectors or pockets or they may unwind further?
A: That’s a very difficult call to take. We have to play it scrip to scrip. It is difficult to take it sector to sector.
Q: You had concerns about spaces like real estate etc. Do you think they have corrected enough?
A: I have been a real estate stock bear and have been wrong earlier. I still feel there is space to go there.
Q: Any other clear space where lots of excesses have happened?
A: In the infrastructure sector, there is lot of excess valuations. Stocks will take time. It will take time for the excesses to wear off.
Q: You have been a big bull of that space and have had big holdings like Praj, and Punj Lloyd? Do you think there were excesses at the top in those kinds of areas as well?
A: Suddenly the valuations were quite high.
Q: But have they corrected enough after this big fall?
A: They have corrected. But for them to really gain their old highs it will take time.
Q: India has been one of the biggest underperformers in the last three months. Do you think there are local problems as well, which we need to content with over the next one year?
A: The way to tackle inflation is to increase supply. To keep interest rate high in the face of low interest rate worldwide, is a local problem. A friend of mine told me sometime back that the true bottom of this market will be made the day the election is announced, but that has been the history of our markets.
Q: Does politics present a threat to this market?
A: We have seen the worst of whatever the threat could be. I don’t think they are going to impose price controls anywhere. Also, India has grown a lot without the politicians. So, I am not afraid if Mayawati becomes Prime Minister, but I hope she will not. I think politics has done no good. If god were to grant me one wish, I would ask him to let anybody be the Prime Minister of this country, but let not that government be supported by Communists, because if you were to listen to the Communists we were to get everything free and don’t have to work for anything.
Q: Does government policy worry you? We have seen quite a bit of price control etc in the last one-month? Does it worry you significantly?
A: Not at all, because we have been hearing all this for so many years but India has trudged along. Do you think anything has changed in the last 12 years?
Q: What about steel? If I remember correctly, you bought some steel stocks earlier, didn’t you own Tata Steel?
A: Yes. I bought some steel stocks even lately. They are not going to impose any price controls. SAIL and Tata Steel are placed very well as far as government rules are concerned. If steel prices go up, they benefit because they have captive commodities.
Q: What is essentially different about what is going on now in the market and what you saw in 2001 and 1992?
A: Valuations in these times never got to 1992 levels. In 1992, we were trading at 65 times earnings, 2001 at 35-32 times earnings, and this year we peaked at 21 times maybe 2009 earnings.
Q: In some pockets like infrastructure etc we did go to 30-40 kind of P/E multiples?
A: Yes, maybe but that was not a very large part of the market. After all, the largest part of the market is the Sensex and Nifty. The bull market that started in 2003 cannot end at less than 30-35 earnings or at least 25-30 times for the index.
Q: Let me paint a bearish scenario. The bears say that interest rates go up even from here, which may not be justified. But in our country sometimes we do things which are not justified. GDP growth slows to sub-7%, earnings growth slows to 10-12%, could we have then in that kind of situation a compressed one-two year kind of a bear phase? Is that a likely scenario or even a possible scenario in your eyes?
A: 4,100-4,200 which corresponds to 12,500-13,000 on the Index is a level which we are not going to penetrate on the downward side very easily. 5,300-5,400 upside on the Nifty is a level that we will not penetrate easily. So, we could be in a 4,200 range. The range could be 4,500-5,300 instead of 4,200-5,300. We could pass a year or 18 months.
Q: Is it a good time for investors to buy stocks or do you think they won’t be rewarded in the next one-year or so?
A: I don’t think we as investors should be worried about what rewards we can get in a year. I have made the biggest money by understanding that I get the reward within a time period which is reasonable and one-year is never reasonable. If one gets good stocks at valuations which one thinks are good and feel the ultimate value of the stock will be far higher, one should buy it.
Q: How much damage has been done this time around because in our country because a very narrow section of the population invest in stocks?
A: Everybody’s portfolio is damaged, but my portfolio doubled in one-year. You went from 100-200 then, came back to 140-150 and right now are at 130-135. The increase was very severe and the fall was equally severe. I don’t think the damage has take place with those Charlie’s who came to make a fast buck. The serous investors who invested through the last four-five years have been getting very good returns.
Q: Do you think they will hold the faith, which has been seen so far in the mutual fund portfolio with no major redemptions? Do you think this whole phase will pass without significant mutual fund redemptions?
A: Why do you think these redemptions are not taking place? It’s not an act of defiance according to me. It is because may be it is supports. The amount of money that has to come to India for investing locally is far greater than what we have had. So, some people are withdrawing but every other money is going up. Prosperity is also going up. People who are running businesses are feeling the prosperity. So, may be the redemptions may not take place. It could also be that the kind of money which has come is good genuine money and not some short-term scam money.
Q: Having seen five-years of bull run and then a sharp three-month correction, do you think it is time to re-orient your investment strategy somewhat because a few things have fallen off the cliff? - Is it time to change your horses?
A: I have followed one investment strategy all my life. Good investing gives you good returns. It depends on your investment strategy. My investment methodology and strategies don’t change as markets keep changing. If I have a good stock, then it is going to give returns. One thing which supports the market is the bodyweight of solid liquidity. With these kind of high oil prices, where is all this surplus money with West Asian countries going to go?
Q: But you trade as well, do you sense that different sectors are coming back? IT has had a nice rally after a long time, They were two years out in the cold. Is it possible that some of these losers of the last couple of years could stage a comeback?
A: I am not personally so bullish on IT.
Q: You have not been for a while?
A: Yes, because they are a mature industry, all institutions own them. I think growth is going to be limited there. There are uncertainties in the principal markets. Although I have true respect and true regard for the Infosys management, I think meeting their guidance is going to be a challenge.
Q: Do you think there is a risk out there?
A: I think there is a challenge, because conditions in the US are going to get worse by the day. They are saying they expect the second quarter in the US to be better .
Q: Which is when you think the problems will start dropping in?
A: I think there will be three stages of the problem in America. First is the realisation of the subprime problem. Second, the economy will slowdown as a result. I think defaults would creep into prime housing, into credit cards and auto loans and maybe commercial real estate. I think that will be the second stage. The third stage is going to be a depression.
Q: Have you ever bought an FMCG stock in your life?
A: Yes, I have.
Q: Not Tata Tea?
A: No, not Tata Tea. I have another FMCG stock in which I own more than 5%.
Q: So, a largecap FMCG stock?
A: I won’t say largecap but fairly good company called Agro Tech Foods.
Q: But none of the ones we know like Colgate, Dabur, Marico, and Lever. You have never bought them in your life?
A: I may have bought some stocks like Colgate and sold it. I bought some shares in Lever in 2004 and sold it in 2005. I have made good money there.
Q: Have you ever been a big pharmaceutical investor?
A: I have a large investment in Lupin and made good money in Matrix. I made some small investments in Ranbaxy.
Q: Do you subscribe to the theory that capital goods or power is a sector, which was such a big leader, is on the wane and will not lead to the next rally?
A: Wane is about P/Es. Pharma P/Es are set to go up. That’s one sector which will not dip if we get a prolonged correction. If you look at some of the P/E e ratios of pharma companies, they are certainly attractive. Everybody has been so ebullient about capital goods and that’s why P/E’s are high. It will take time for earnings to catch up.
Q: What are your thoughts on oil and gas as a space? You just spoke about crude; do you think there is an oil and gas play in India from a stock market perspective?
A: Well I would Reliance is a big oil and gas play. There could be some interesting plays in the smallcaps and the midcaps.
Q: Exploration?
A: Yes, exploration.
Q: You were once a bull on Indian Oil Corporation. You lost your hope in them?
A: I will never buy them, I promise. Wherever government is involved I am going to be very careful.
Q: That's surprising coming from you because you made a lot of money from PSU companies like BEML and Bharat Electronics?
A: But at what valuations? I started buying Bharat Electronics at Rs 32, BEML at Rs 30. Also what I realized and why I sold this is that for companies to really gain at these valuations, one has got have that plus-plus. The investor has to have faith that these companies are innovative, they are going to do something new. They are going to do something different. I don't find that in the public sector. They are constrained. Indian Oil--I read Rs 450 crore is what we are losing on fuel everyday. But there are interesting opportunities in exploration. I have some investment in that sector.
Q: But they are small and midcap companies?
A: Yes.
Q: What are the chances that in 2009 you go to something much beyond the old high that you saw on the index? Do you think it is conceivable? What needs to fall into place for that to pan out?
A: America needs to go for present tense. It is important that Infosys achieves this guidance it has given. What is important to the Indian economy is the value-add that software brings. If Infosys adds 25,000 employees, it translates into 25,000 cars and 25,000 homes. Then, that in turn leads to cement and steel. It is not any small value-add. If the US grows at 4%, Indian software will grow at 40%. The sentiment of investors worldwide will be extremely bullish. If you achieve earnings of say 1,030-1,040 in March 2009, then you go to 1,200 by March 2010. So, maybe in May 2009 you are going to see a very good rise.
Q: Are you looking at 25-30 P/E multiples?
A: For that we are still 4-5 years away. We will get there.
Q: We didn’t pass it in December last year?
A: That is why the top of the bull market was not made. The top of the bull market will be made when the value of the Indian Embassy in Japan is greater than the land in Delhi. If we had continued with the real estate led bull market in December 2007 we would have reached those levels.
Q: Do you sometimes feel apprehensive with your view today that 4,200 is a bottom worst case scenario can be violated and you may be surprised?
A: If it is violated, I would surely be surprised. But welcome this correction. I don’t think it is a bear market. It is a correction because had we continued at that pace we might have reached a level where we would have damaged that market beyond repair. It will still go much further. For that to happen, we have got to have this correction.
Q: How will you approach this phase if it pans out like you expected, one year of essentially rangebound movements. From your trading and investment perspective, how will you approach it?
A: I will limit my trading extremely. My trading levels will come to 10-20% of that level. We need a rangebound markets. I don’t buy anything at one price but buy at stages.
Q: What will you trade more in the next one year the Nifty or individual stocks? Where will the opportunities be?
A: Nowadays,, I tend to trade in the Nifty more because I find it very liquid.
Q: From an investment perspective?
A: I will see whatever opportunity comes. I am making investments. I made some investments in April, March, and February.
Q: Will you consider paring down some money and moving to cash in the next one-year?
A: I essentially have no debt or very little debt. So, I can always take debt if I find investments to be adequate. If I feel that I have such a great opportunity that I must invest and I don’t have the capital, I may sell some of my investments and interchange.
Q: So, your convinced that this is just a long painful correction in a bull market. It is not a bear market that you are seeing for the last three-months?
A: That’s what I think.
Q: Convinced?
A: Yes, 100%. Once America bottoms because the greater surprise is going to come from the World Cup markets. There is so much to come from India once this gas comes. More the power, more investment is needed. This will itself be such a big trigger. I cannot believe that the bull story, which is linked to India’s economy with 5-6% of Indian’s savings coming into equity and with the kind of Indian sprit and entrepreneurship, can die. If this is the end of the bull market then India really has incurred god’s wrath. But it may be long and painful.
Rohit
Market may open higher on firm Asian markets
The market is likely to open higher tracking positive Asian markets. In absence of any near term major domestic trigger with Q4 March 2008 results almost over, market is likely to dance in line with global cues.
Expiry of May 2008 futures & options series on Thursday, 29 May 2008 will keep the market volatile in the coming days. As per reports, rollover of Nifty positions from May 2008 series to June 2008 series stood at 39% and marketwide positions were 30%, as on 26 May 2008.
Asian markets were trading firm today, 27 May 2008, as bargain hunters scoured the market after five days of losses. Japan's Nikkei (up 0.82% at 13,802.62), Hong Kong's Hang Seng (up 0.56% at 24,263.52), Taiwan's Taiwan Weighted (up 0.56% at 8,756.69), South Korea's Seoul Composite (up 0.94% at 1,817.56) and Singapore's Straits Times (up 0.05% 3,105.24), edged higher. However China's Shanghai Composite fell 3.13% at 3,364.54.
US markets were closed on Monday, 26 May 2008 for Memorial Day.
Back home, relentless selling in banking, and capital goods stocks led the fall on Monday, 26 May 2008. The 30-share BSE Sensex was down 301.14 points or 1.81% at 16,348.50 and the broader based S&P CNX Nifty was down 71.5 points or 1.45% at 4875.05, on that day.
As per provisional data, foreign funds sold shares worth a net Rs 1337.33 crore on Monday, 26 May 2008. Domestic funds bought shares worth a net Rs 842.05 crore on that day.
Foreign institutional investors (FIIs) were net sellers of Rs 638.39 crore in the futures & options segment on Monday, 26 May 2008. They were net sellers of index futures to the tune of Rs 361.74 crore and bought index options worth Rs 40.72 crore. They were net sellers of stock futures to the tune of Rs 387.22 crore and bought stock options worth Rs 69.85 crore.
ROhit
Expiry of May 2008 futures & options series on Thursday, 29 May 2008 will keep the market volatile in the coming days. As per reports, rollover of Nifty positions from May 2008 series to June 2008 series stood at 39% and marketwide positions were 30%, as on 26 May 2008.
Asian markets were trading firm today, 27 May 2008, as bargain hunters scoured the market after five days of losses. Japan's Nikkei (up 0.82% at 13,802.62), Hong Kong's Hang Seng (up 0.56% at 24,263.52), Taiwan's Taiwan Weighted (up 0.56% at 8,756.69), South Korea's Seoul Composite (up 0.94% at 1,817.56) and Singapore's Straits Times (up 0.05% 3,105.24), edged higher. However China's Shanghai Composite fell 3.13% at 3,364.54.
US markets were closed on Monday, 26 May 2008 for Memorial Day.
Back home, relentless selling in banking, and capital goods stocks led the fall on Monday, 26 May 2008. The 30-share BSE Sensex was down 301.14 points or 1.81% at 16,348.50 and the broader based S&P CNX Nifty was down 71.5 points or 1.45% at 4875.05, on that day.
As per provisional data, foreign funds sold shares worth a net Rs 1337.33 crore on Monday, 26 May 2008. Domestic funds bought shares worth a net Rs 842.05 crore on that day.
Foreign institutional investors (FIIs) were net sellers of Rs 638.39 crore in the futures & options segment on Monday, 26 May 2008. They were net sellers of index futures to the tune of Rs 361.74 crore and bought index options worth Rs 40.72 crore. They were net sellers of stock futures to the tune of Rs 387.22 crore and bought stock options worth Rs 69.85 crore.
ROhit
Kalpataru Power Transmission has recommended dividend
he board of Kalpataru Power Transmission has recommended dividend at therate of Rs 7.50 per share (75%).
This was recommended at the board meeting held on26 May 2008.
Rohit
This was recommended at the board meeting held on26 May 2008.
Rohit
Kalpataru Power Transmission net profit declines 21.96% in the March 2008 quarter
Net profit of Kalpataru Power Transmission declined 21.96% to Rs 50.30 crore in the quarter ended March 2008 as against Rs 64.45 crore during the previous quarter ended March 2007. Sales rose 20.57% to Rs 629.54 crore in the quarter ended March 2008 as against Rs 522.15 crore during the previous quarter ended March 2007.
For the full year, net profit declined 6.03% to Rs 149.88 crore in the year ended March 2008 as against Rs 159.49 crore during the previous year ended March 2007. Sales rose 13.95% to Rs 1737.58 crore in the year ended March 2008 as against Rs 1524.85 crore during the previous year ended March 2007.
Rohit
For the full year, net profit declined 6.03% to Rs 149.88 crore in the year ended March 2008 as against Rs 159.49 crore during the previous year ended March 2007. Sales rose 13.95% to Rs 1737.58 crore in the year ended March 2008 as against Rs 1524.85 crore during the previous year ended March 2007.
Rohit
Monday, May 26, 2008
Omaxe Results
Omaxe Ltd has announced the following Audited results for the year ended March 31, 2008:
The Company has posted a profit after tax of Rs 3988.03 million for the year ended March 31, 2008 as compared to Rs 1248.30 million for the year ended March 31, 2007. Total Revenue has increased from Rs 9475.65 million for the year ended March 31, 2007 to Rs 18120.34 million for the year ended March 31, 2008.
The Consolidated results are as follows:
The Group has posted a profit after tax of Rs 4948.76 million for the year ended March 31, 2008 as compared to Rs 2439.61 million for the year ended March 31, 2007. Total Revenue has increased from Rs 14399.24 million for the year ended March 31, 2007 to Rs 23077.56 million for the year ended March 31, 2008.
Rohit
The Company has posted a profit after tax of Rs 3988.03 million for the year ended March 31, 2008 as compared to Rs 1248.30 million for the year ended March 31, 2007. Total Revenue has increased from Rs 9475.65 million for the year ended March 31, 2007 to Rs 18120.34 million for the year ended March 31, 2008.
The Consolidated results are as follows:
The Group has posted a profit after tax of Rs 4948.76 million for the year ended March 31, 2008 as compared to Rs 2439.61 million for the year ended March 31, 2007. Total Revenue has increased from Rs 14399.24 million for the year ended March 31, 2007 to Rs 23077.56 million for the year ended March 31, 2008.
Rohit
Bharti Airtel deal with MTN failed
Bharti Airtel, India’s largest private sector telecom company, has made a public announcement stating that the talks with South Africa based MTN Group have failed. It seems there has been differences between the management of both the companies over which company would end up with the control of the merged entity. The combine, if the deal had materialised, would have been the world’s 6th largest mobile operator. It should be noted that MTN is much larger in size than Airtel and hence it wanted control over the merged entity after the merger took place. Bharti Airtel did not agree to this deal and instead wanted the control of the merged entity for itself.
Rohit
Rohit
Nutek IPO
Nutek IPO is another IPO which is likely to hit the markets in June 2008. The DRHP filed by the company has received the approval of SEBI, last week. India Infoline and SPA Merchant Bankers, a small Mumbai based Merchant Bank, are the lead managers for the Nutek IPO. Nutek India IPO subscription dates and the price band for the public issue will be announced by the company about a week before the issue opens for public subscription. Nutek India IPO is a small IPO and hence is likely to get oversubscribed quickly. More details about the IPO will be posted here in a few days time.
Rohit
Rohit
Best Books on Investment
The following books are a “must read” for those investing or trading in the stock markets. These books contain valuable lessons which will both help minimise risk as well as increase returns. If I’ve left out any book do add it as a comment. (Books listed in a random order)
Name Of The Book Author
Drummond Geometry Charles Drummond
Elliot Wave Theory for Short Term and Intraday Trading Stephen Poser
Intelligent Investor Benjamin Graham
The Day Trader’s Bible Richard D. Wyckoff
How To Think Like Benjamin Graham and Invest
like Warren Buffett Mcgraw-Hill
Swing Trading Oliver Velez
Elliott Wave Principle Robert Prechter
Reminiscences of a Stock Operator Edwin LeFevre
Entire “Rich Dad Poor Dad” Series Robert T. Kiyosaki
Rohit
Name Of The Book Author
Drummond Geometry Charles Drummond
Elliot Wave Theory for Short Term and Intraday Trading Stephen Poser
Intelligent Investor Benjamin Graham
The Day Trader’s Bible Richard D. Wyckoff
How To Think Like Benjamin Graham and Invest
like Warren Buffett Mcgraw-Hill
Swing Trading Oliver Velez
Elliott Wave Principle Robert Prechter
Reminiscences of a Stock Operator Edwin LeFevre
Entire “Rich Dad Poor Dad” Series Robert T. Kiyosaki
Rohit
Investment Lessons from World's Great Investors
An elite group of great professional investors (world’s greatest investors) have shown time and again that it is certainly possible to beat the market continuously and consistently over long periods of time. These people act as an inspiration and as an example to less experienced investors. The methods they followed have become legendary and these can act as a starting point for beginners looking to familiarise themselves with the basics of investing and trading in the financial markets (stock markets, forex markets and so on)
Becoming a successful investor needs patience, learning and sometimes even a bit of luck. But investing other people’s money is entirely a different ball game. Fund managers rely on hard work, intelligence and financial discipline to find opportunities that other professionals might have missed.
Given below is a list of 7 people who excelled in this and managed to beat the markets continuously over long periods of time.
Warren Buffett
Peter Lynch
John Bogle
George Soros
John Templeton
Julian Robertson
Michael Steinhardt
Warren Buffett
Born: Omaha, Nebraska in 1930
Employer: Berkshire Hathaway Chairman
Most Known For: A $10,000 investment into Berkshire Hathaway when Buffett took control in 1965 would be worth over $50 million today. By comparison, $10,000 in the S&P 500 would have grown to only $500,000.
Less Known For: Buffett is considered by many to be a real Scrooge (in fact his personalized license plate reads, “Thrifty”). Reportedly he is only going to bequeath around $3 to $4 million to each of his children, despite his $40+ billion net worth. However, he does so with good intentions and plans on leaving the vast majority of his fortune to charitable causes.
Quotes: “If past history was all there was to the game, the richest people would be librarians.”
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
“Risk comes from not knowing what you’re doing.”
Peter Lynch
Born: United States in 1944
Employer: Former Fidelity fund manager, today he is the vice-chairman of Fidelity
Most Famous For: When he started managing the Fidelity Magellan Fund in 1978, it had assets of $20 million. When he retired in 1990, it had assets of $14 billion.
Less Celebrated For: Some people were not too pleased when Lynch, one of the greatest, retired at the tender age of 46.
Quote: “Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it.”
John (Jack) Bogle:
Born: Montclair, New Jersey in 1929
Employer: Founder and Chairman of The Vanguard Group
Most Famous For: Often referred to as the father of index fund investing, he’s the creator of the first S&P 500 index fund.
Less Celebrated For: Admits that mutual funds “haven’t been up front with investors - top fund performance has always been followed by mediocre returns”.
Quote: “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
George Soros
Born: Budapest in 1930
Employer: Founder of Soros Fund Management
Most Famous For: A highly respected currency speculator, he once shorted the British Pound for a one day gain in excess of $1 billion.
Less Celebrated For: Although not entirely responsible, Soros’ comments on the Russian economy contributed to its stocks plunging 12% in the first hour of trading. Five days later, the currency had devalued 25%.
Quote: “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
John Templeton
Born: Winchester, Tennessee in 1912
Employer: Founder of the Templeton Group
Most Famous For: Created some of the world’s largest and most successful global investment funds using his independent investment strategy.
Less Celebrated For: More recently, his funds have failed to provide the astounding gains his followers were used to, partly due to the recent Asian recession.
Quote: “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”
Julian Robertson
Born: Salisbury, NC in 1933
Employer: Founder/Chairman, Tiger Management Corp.
Most Famous For: A titan of hedge fund investing, his funds today require a minimum investment of $5 million per person. He turned $8 million in 1980 into over $8 billion in the late 1990s.
Less Celebrated For: Remembered for losing $200 million in 1996 when a “bet” on U.S. Treasuries went wrong.
Quote: “[O]ur mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don’t do better than the 200 worst, you probably should get in another business.”
Michael Steinhardt
Born: 1941
Employer: Founder, Steinhardt Partners
Most Famous For: $1 invested with Steinhardt when he founded his firm in 1967 would be worth $462 today.
Less Celebrated For: Steinhardt didn’t exactly go out with a bang. He ended his illustrious hedge fund career in 1995, a year after suffering big losses.
Quote: “In the 1950s and 1960s, the heroes were the long-term investors; today the heroes are the wise guys.”
Do feel free to add other great investors whom I might have missed out.
Rohit
Becoming a successful investor needs patience, learning and sometimes even a bit of luck. But investing other people’s money is entirely a different ball game. Fund managers rely on hard work, intelligence and financial discipline to find opportunities that other professionals might have missed.
Given below is a list of 7 people who excelled in this and managed to beat the markets continuously over long periods of time.
Warren Buffett
Peter Lynch
John Bogle
George Soros
John Templeton
Julian Robertson
Michael Steinhardt
Warren Buffett
Born: Omaha, Nebraska in 1930
Employer: Berkshire Hathaway Chairman
Most Known For: A $10,000 investment into Berkshire Hathaway when Buffett took control in 1965 would be worth over $50 million today. By comparison, $10,000 in the S&P 500 would have grown to only $500,000.
Less Known For: Buffett is considered by many to be a real Scrooge (in fact his personalized license plate reads, “Thrifty”). Reportedly he is only going to bequeath around $3 to $4 million to each of his children, despite his $40+ billion net worth. However, he does so with good intentions and plans on leaving the vast majority of his fortune to charitable causes.
Quotes: “If past history was all there was to the game, the richest people would be librarians.”
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”
“Risk comes from not knowing what you’re doing.”
Peter Lynch
Born: United States in 1944
Employer: Former Fidelity fund manager, today he is the vice-chairman of Fidelity
Most Famous For: When he started managing the Fidelity Magellan Fund in 1978, it had assets of $20 million. When he retired in 1990, it had assets of $14 billion.
Less Celebrated For: Some people were not too pleased when Lynch, one of the greatest, retired at the tender age of 46.
Quote: “Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it.”
John (Jack) Bogle:
Born: Montclair, New Jersey in 1929
Employer: Founder and Chairman of The Vanguard Group
Most Famous For: Often referred to as the father of index fund investing, he’s the creator of the first S&P 500 index fund.
Less Celebrated For: Admits that mutual funds “haven’t been up front with investors - top fund performance has always been followed by mediocre returns”.
Quote: “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
George Soros
Born: Budapest in 1930
Employer: Founder of Soros Fund Management
Most Famous For: A highly respected currency speculator, he once shorted the British Pound for a one day gain in excess of $1 billion.
Less Celebrated For: Although not entirely responsible, Soros’ comments on the Russian economy contributed to its stocks plunging 12% in the first hour of trading. Five days later, the currency had devalued 25%.
Quote: “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
John Templeton
Born: Winchester, Tennessee in 1912
Employer: Founder of the Templeton Group
Most Famous For: Created some of the world’s largest and most successful global investment funds using his independent investment strategy.
Less Celebrated For: More recently, his funds have failed to provide the astounding gains his followers were used to, partly due to the recent Asian recession.
Quote: “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”
Julian Robertson
Born: Salisbury, NC in 1933
Employer: Founder/Chairman, Tiger Management Corp.
Most Famous For: A titan of hedge fund investing, his funds today require a minimum investment of $5 million per person. He turned $8 million in 1980 into over $8 billion in the late 1990s.
Less Celebrated For: Remembered for losing $200 million in 1996 when a “bet” on U.S. Treasuries went wrong.
Quote: “[O]ur mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don’t do better than the 200 worst, you probably should get in another business.”
Michael Steinhardt
Born: 1941
Employer: Founder, Steinhardt Partners
Most Famous For: $1 invested with Steinhardt when he founded his firm in 1967 would be worth $462 today.
Less Celebrated For: Steinhardt didn’t exactly go out with a bang. He ended his illustrious hedge fund career in 1995, a year after suffering big losses.
Quote: “In the 1950s and 1960s, the heroes were the long-term investors; today the heroes are the wise guys.”
Do feel free to add other great investors whom I might have missed out.
Rohit
Rules of investing in Mutual Funds
There are some 800 mutual fund schemes from 30-odd mutual fund houses in the market. Can an investor cut through the hype, the incentive-driven sales pitch and product clutter to pick up funds that suit his investment objective? He can, if he follows four broad rules of investing in mutual funds.
RULE 1:
Returns are important, but not enough If your fund has had a bad quarter, try to figure out why. Check what stocks it added and exited, and whether the decisions made sense. But don’t do this more than once in three months. You are paying over 2% a year as management fees, so there’s not much point in looking over your fund manager’s shoulder every week. Some of my clients take this to an annual extreme. They check fund performance every April, and just sleep out the rest of the year. If I beat the benchmark, they grin. If not, they grunt. They grill me on my decisions and then decide whether to trust me with their money for another year. I think they are sensible investors, even if I lose them.
RULE 2:
Beware of frequent NFOs Globally, the best mutual fund houses have large, omnibus open-ended funds that serve as flagship schemes. After all, a mutual fund is one of the few consumer products that should get more attractive for new buyers as it ages (and continuously demonstrates good performance). Sure, new products will get launched, and with good reason (themes, sectors, etc, are not good reasons to launch a new fund, but offering a different risk-reward proposition is). But if a fund house launches an NFO every quarter, then it probably thinks that mutual funds are like FMCGs. Our very own Money Today model portfolios are two simple illustrations of different risk profiles. Like any large-cap fund, Safe Wealth invests in frontline stocks, MNCs and hi-pedigree managements. In contrast, Wealth Zoom, bets on relatively riskier growth stocks, much the same way as mid-cap funds. More segmentation of the risk-reward equation is possible, but it can get very esoteric for lay investors. Best to keep things simple.
RULE 3:
Index funds are a good bet If all you want is a return linked to the BSE Sensex or Nifty, then the best thing is to invest in index funds. These attempt to replicate a particular index, and will charge you much lower fees than a normal mutual fund. If you are really a long-term investor, and have a broad view that’s positive on the market, this is probably the least risky and most rewarding way to invest. Apart from pure index funds, there are other equity funds which invest primarily in large caps and have done moderately to marvellously well in the past few years.
RULE 4:
Buy for the long term Yawning already? Yeah, been there, but not done that! Try and avoid exiting a mutual fund investment in less than a couple of years. Unless, of course, you really need the money. With 35-40 stocks, a mutual fund is a low volatility, long-term capital builder. If you feel like redeeming what looked like manna from heaven till the other day, figure out the real reason why. Better still, figure out why you want to buy a particular fund before you invest.
Shakti
RULE 1:
Returns are important, but not enough If your fund has had a bad quarter, try to figure out why. Check what stocks it added and exited, and whether the decisions made sense. But don’t do this more than once in three months. You are paying over 2% a year as management fees, so there’s not much point in looking over your fund manager’s shoulder every week. Some of my clients take this to an annual extreme. They check fund performance every April, and just sleep out the rest of the year. If I beat the benchmark, they grin. If not, they grunt. They grill me on my decisions and then decide whether to trust me with their money for another year. I think they are sensible investors, even if I lose them.
RULE 2:
Beware of frequent NFOs Globally, the best mutual fund houses have large, omnibus open-ended funds that serve as flagship schemes. After all, a mutual fund is one of the few consumer products that should get more attractive for new buyers as it ages (and continuously demonstrates good performance). Sure, new products will get launched, and with good reason (themes, sectors, etc, are not good reasons to launch a new fund, but offering a different risk-reward proposition is). But if a fund house launches an NFO every quarter, then it probably thinks that mutual funds are like FMCGs. Our very own Money Today model portfolios are two simple illustrations of different risk profiles. Like any large-cap fund, Safe Wealth invests in frontline stocks, MNCs and hi-pedigree managements. In contrast, Wealth Zoom, bets on relatively riskier growth stocks, much the same way as mid-cap funds. More segmentation of the risk-reward equation is possible, but it can get very esoteric for lay investors. Best to keep things simple.
RULE 3:
Index funds are a good bet If all you want is a return linked to the BSE Sensex or Nifty, then the best thing is to invest in index funds. These attempt to replicate a particular index, and will charge you much lower fees than a normal mutual fund. If you are really a long-term investor, and have a broad view that’s positive on the market, this is probably the least risky and most rewarding way to invest. Apart from pure index funds, there are other equity funds which invest primarily in large caps and have done moderately to marvellously well in the past few years.
RULE 4:
Buy for the long term Yawning already? Yeah, been there, but not done that! Try and avoid exiting a mutual fund investment in less than a couple of years. Unless, of course, you really need the money. With 35-40 stocks, a mutual fund is a low volatility, long-term capital builder. If you feel like redeeming what looked like manna from heaven till the other day, figure out the real reason why. Better still, figure out why you want to buy a particular fund before you invest.
Shakti
Stocks in news today
Stocks in news:
* Results today:
eClerx Services, Ess Dee Aluminium, Everest Kanto Cylinder, Kalpataru Power, Omaxe, REC, Shriram Transport Finance, Usha Martin Infotech
* New listing:
Bajaj Auto (after demerger); no circuit filter today; to be part of NSE F&O, futures lot size 200 shares; options strike prices between Rs 30-3330
Bajaj Finserv, Bajaj Auto (after demerger); no circuit filter today
* Bharti-MTN Saga
Pulls Out of Talks with MTN
Too Many Movements From MTN Led To Talks Being Called Off
MTN's New Structure Proposed Airtel Becoming A Subsidiary Of MTN
MTN Wanted Singtel Shrs In Exchange For Controlling Stake In MTN
Bharti says Not To Engage In Any Bidding War For Any Buyout
MTN Started Talks With Rel Comm Thursday Night
Alert: MTN Will Update Shareholders As The Market Opens On Monday Morning
* Rel Comm likely to accepts the MTN structure, RCom to transfer its 66% stake and become largest shareholder in MTN with 34% stake - ET
* Karnataka elections
BJP Gets 111 Seats In 224-member Assembly
BJP's BS Yeddyurappa Likely To Take Oath As CM On May 28
BJP Will Form Govt On Its Own In South India For 1st Time
Special Programmes For SC/ST & Minorities In The State: Yeddyurappa
Special Programmes Will Be Initiated For Industrialisation: Yeddyurappa
Rajnath Singh Says Karnataka Is An Indicator To General Elections
* Fuel price hike on hold for two weeks: PTI
* Fin Min
Opposed To Immediate Duty Cut On Petro Pdts On Inflationary Concerns: Srcs
* Left Parties
Oppose Any Move To Hike Oil Prices
CPI (M)'s Prakash Karat Reiterates Demand For Oil Product Duty Rejig
Hope Govt Won't 'Commit Suicide' By Raising Fuel Prices: Karat
* IOC
Seeks shareholder nod to increase working capital borrowings to Rs 80,000 cr from Rs 20,000 cr & $4.5 bn foreign borrowings
Seeks shareholder nod to mortgage moveable/immoveable properties
Borrowing as of Mar 31st 2008 at Rs 35,400cr with current paid up and free reserves as of Dec 31st was at Rs 41341 cr
Alert: IOC seeks shareholder nod via postal ballot
* R Power, GMR to bid for second power plant put on block by Temasek in Singapore -BS
* Rel Comm, Sources Say:
In Advanced Talks To Acquire London-based MVNO Vanco
Rel Comm-Vanco Deal Likely To Be Inked In Next Few Days
Deal size likely to be about $75 m
Rel Comm Refuses To Comment On Talks With Vanco
* Geojit Fin
To Shutdown Commodity Biz
Geojit Comm Biz To Be Closed To Get RBI Nod For BNP Paribas Open Offer
BNP Paribas To Pay Rs 40 Cr To Geojit Fin For Closure Of Comm Biz
* Indus Ind Bank plans GDR issue in first quarter of FY09 - FE
* SRF set to acquire Thailand based Co for Rs 200 cr - HT
* BHEL, Chinese cos eyeing Rs 2400 cr EPS contract from CESC - ET
* Citi Port financial open offer at Rs 18.50/sh
* Bank of Rajasthan board meet on May 31 to consider bonus issue
* Govt Says No Plan To Withdraw Sugar Export Subsidy Before Sep 30: NW18
* HDIL to bid for 10 Nelp blocks - DNA
* Re-listing
Andrew Yule (after reduction of capital)); no circuit filter today
Duroflex Engineering to resume trading; no circuit filter today
* Niraj Cement Structurals IPO opens today; offer of 32.5 lakh shares; price band Rs 175-190
* CBoP to be suspended after trading on June 6
* HUL Ups Product Prices By 3-28% Since Apr: NW18
* Gremach Infrastructure board approves issue of 1.5 cr convertible warrants to promoters
* Ex-dividend:
ABB (Rs 2.20/sh), Eicher Motors (Rs 5/sh)
* Cipa close to major OTC deal with Aussie firm- BS
* Crompton Greaves FY08 Consolidated
Net Sales At Rs 6,832 Cr Vs Rs 5,934 Cr
Net Profit At Rs 406.7 Cr Vs Rs 286.5 Cr
* Crompton Greaves Q4 Standalone
Net Sales: Rs 1159.53 cr Vs Rs 1077.17 cr
Other Income: Rs 24.06 cr vs Rs 13.28 cr
Operating Profit: Rs 156.55 cr vs Rs 114.33 cr (Up 37%)
Net Profit: Rs 103.07 cr vs Rs 69.92 cr (Up 47%)
* Geojit Fin Q4 Consolidated (YoY)
Net Sales: Rs 60.9 cr vs Rs 34.67 cr
Other Income: Rs 3.21 cr vs Rs 1.47 cr
Operating Profit: Rs 16.91 cr vs Rs 11.22 cr
Net Profit: Rs 11.8 cr vs Rs 5.74 cr (Up 106%)
* Geojit Q4 (QoQ) Consolidated
Net Sales: Rs 60.9 cr vs Rs 78.66 cr
Other Income: Rs 3.21 cr vs Rs 2.23 cr
Operating Profit: Rs 16.91 cr vs Rs 32.75 cr
Net Profit: Rs 11.8 cr vs Rs 22.24 cr
* TCI Q4
Net Sales: Rs 328.32 cr vs Rs 292.22 cr
Other Income: Rs 1.27 cr vs Rs 1.45 cr
Operating Profit: Rs 23.18 cr vs Rs 20.87 cr
Net Profit: Rs 15.65 cr vs Rs 9.42 cr
* Repro India Q4
Net Sales: Rs 35.05 cr vs Rs 35.74 cr
Other Income: Rs 75 lakh vs Rs 9 lakh
Net Profit: Rs 4.58 cr vs Rs 2.72 cr
Rohit
* Results today:
eClerx Services, Ess Dee Aluminium, Everest Kanto Cylinder, Kalpataru Power, Omaxe, REC, Shriram Transport Finance, Usha Martin Infotech
* New listing:
Bajaj Auto (after demerger); no circuit filter today; to be part of NSE F&O, futures lot size 200 shares; options strike prices between Rs 30-3330
Bajaj Finserv, Bajaj Auto (after demerger); no circuit filter today
* Bharti-MTN Saga
Pulls Out of Talks with MTN
Too Many Movements From MTN Led To Talks Being Called Off
MTN's New Structure Proposed Airtel Becoming A Subsidiary Of MTN
MTN Wanted Singtel Shrs In Exchange For Controlling Stake In MTN
Bharti says Not To Engage In Any Bidding War For Any Buyout
MTN Started Talks With Rel Comm Thursday Night
Alert: MTN Will Update Shareholders As The Market Opens On Monday Morning
* Rel Comm likely to accepts the MTN structure, RCom to transfer its 66% stake and become largest shareholder in MTN with 34% stake - ET
* Karnataka elections
BJP Gets 111 Seats In 224-member Assembly
BJP's BS Yeddyurappa Likely To Take Oath As CM On May 28
BJP Will Form Govt On Its Own In South India For 1st Time
Special Programmes For SC/ST & Minorities In The State: Yeddyurappa
Special Programmes Will Be Initiated For Industrialisation: Yeddyurappa
Rajnath Singh Says Karnataka Is An Indicator To General Elections
* Fuel price hike on hold for two weeks: PTI
* Fin Min
Opposed To Immediate Duty Cut On Petro Pdts On Inflationary Concerns: Srcs
* Left Parties
Oppose Any Move To Hike Oil Prices
CPI (M)'s Prakash Karat Reiterates Demand For Oil Product Duty Rejig
Hope Govt Won't 'Commit Suicide' By Raising Fuel Prices: Karat
* IOC
Seeks shareholder nod to increase working capital borrowings to Rs 80,000 cr from Rs 20,000 cr & $4.5 bn foreign borrowings
Seeks shareholder nod to mortgage moveable/immoveable properties
Borrowing as of Mar 31st 2008 at Rs 35,400cr with current paid up and free reserves as of Dec 31st was at Rs 41341 cr
Alert: IOC seeks shareholder nod via postal ballot
* R Power, GMR to bid for second power plant put on block by Temasek in Singapore -BS
* Rel Comm, Sources Say:
In Advanced Talks To Acquire London-based MVNO Vanco
Rel Comm-Vanco Deal Likely To Be Inked In Next Few Days
Deal size likely to be about $75 m
Rel Comm Refuses To Comment On Talks With Vanco
* Geojit Fin
To Shutdown Commodity Biz
Geojit Comm Biz To Be Closed To Get RBI Nod For BNP Paribas Open Offer
BNP Paribas To Pay Rs 40 Cr To Geojit Fin For Closure Of Comm Biz
* Indus Ind Bank plans GDR issue in first quarter of FY09 - FE
* SRF set to acquire Thailand based Co for Rs 200 cr - HT
* BHEL, Chinese cos eyeing Rs 2400 cr EPS contract from CESC - ET
* Citi Port financial open offer at Rs 18.50/sh
* Bank of Rajasthan board meet on May 31 to consider bonus issue
* Govt Says No Plan To Withdraw Sugar Export Subsidy Before Sep 30: NW18
* HDIL to bid for 10 Nelp blocks - DNA
* Re-listing
Andrew Yule (after reduction of capital)); no circuit filter today
Duroflex Engineering to resume trading; no circuit filter today
* Niraj Cement Structurals IPO opens today; offer of 32.5 lakh shares; price band Rs 175-190
* CBoP to be suspended after trading on June 6
* HUL Ups Product Prices By 3-28% Since Apr: NW18
* Gremach Infrastructure board approves issue of 1.5 cr convertible warrants to promoters
* Ex-dividend:
ABB (Rs 2.20/sh), Eicher Motors (Rs 5/sh)
* Cipa close to major OTC deal with Aussie firm- BS
* Crompton Greaves FY08 Consolidated
Net Sales At Rs 6,832 Cr Vs Rs 5,934 Cr
Net Profit At Rs 406.7 Cr Vs Rs 286.5 Cr
* Crompton Greaves Q4 Standalone
Net Sales: Rs 1159.53 cr Vs Rs 1077.17 cr
Other Income: Rs 24.06 cr vs Rs 13.28 cr
Operating Profit: Rs 156.55 cr vs Rs 114.33 cr (Up 37%)
Net Profit: Rs 103.07 cr vs Rs 69.92 cr (Up 47%)
* Geojit Fin Q4 Consolidated (YoY)
Net Sales: Rs 60.9 cr vs Rs 34.67 cr
Other Income: Rs 3.21 cr vs Rs 1.47 cr
Operating Profit: Rs 16.91 cr vs Rs 11.22 cr
Net Profit: Rs 11.8 cr vs Rs 5.74 cr (Up 106%)
* Geojit Q4 (QoQ) Consolidated
Net Sales: Rs 60.9 cr vs Rs 78.66 cr
Other Income: Rs 3.21 cr vs Rs 2.23 cr
Operating Profit: Rs 16.91 cr vs Rs 32.75 cr
Net Profit: Rs 11.8 cr vs Rs 22.24 cr
* TCI Q4
Net Sales: Rs 328.32 cr vs Rs 292.22 cr
Other Income: Rs 1.27 cr vs Rs 1.45 cr
Operating Profit: Rs 23.18 cr vs Rs 20.87 cr
Net Profit: Rs 15.65 cr vs Rs 9.42 cr
* Repro India Q4
Net Sales: Rs 35.05 cr vs Rs 35.74 cr
Other Income: Rs 75 lakh vs Rs 9 lakh
Net Profit: Rs 4.58 cr vs Rs 2.72 cr
Rohit
DESPERATE MOVES IN DISTRESSED TIMES
Last Friday, the US Federal Reserve had to invoke a Depression-era law so that it could lend to Bear Stearns, the fifth largest brokerage in the US. It did it through J.P. Morgan Chase, as it could not lend directly. The entire risk, however, is the Fed's .
The last time it used this law was in 1971, when the commercial paper market seized up after Penn Central, the largest rail-road company at that time, collapsed . The fact that the Fed has acted in a similar manner now , tells us how seriously it believes the financial system is at risk.
Our markets had run up on Friday on a word of assurance from S&P that woes of the banks having to provide for bad home loans were coming to an end as the banks may not have to provide for more than $ 285 billion, as against expectations of $265 billion at the beginning of the year.
I beg to differ from the view that S&P has given.
While the agency definitely understands economics and the US economy much better than an arm chair economist like me , sitting half away across the globe, the comment may have come a tad too soon.
To draw a kind of line the S&P has drawn, the first assumption it has to make is that home prices in the US will not deteriorate more from here. Any one with the faintest idea of property markets will agree that once the trend changes it takes many years for it start reversing. Lessons learnt from Japanese property markets should not be forgotten too soon. Even 18 years after the property bubble in Japan, prices have not reached the zenith seen in early nineties..
Secondly, despite the fed slashing rates, the mortgage rates have not fallen as much. In fact, the rates of a 30 year mortgage have risen by 0.50% in the last one month, though the Fed has cut rates by 1.25% in the past six weeks.
Thirdly, the banks have tightened the norms further. Essentially it is the desire to play safe, which is preventing the banks to lend aggressively the way they did earlier.
The credit contraction has moved well past its sub-prime mortgage starting point and is currently reaching a whole array of other credit instruments from commercial real estate and leveraged buy-out loans, to consumer receivables and credit default swaps. Anyone still discussing sub-prime means that he must have stopped reading the papers in 2008.
Rating agencies have been awfully behind the curve at all times. As they have a business to run, don't expect them to start bad-mouthing customers who can still pay rating fees. As always, such reports will come out only after the customers are clinically dead and fee-less.
Expect the markets to open the week on a weak note. Advance figures that will come Monday are unlikely to enthuse the markets. The only hope the markets have is the rate cut in the US, which could be 0.75% or a full 1% on Tuesday. A section of the markets would be looking to sell in the enthusiasm post the rate cut as no one would like to keep open positions during the longest weekend, Dalal Street has seen in many years.
Rohit
The last time it used this law was in 1971, when the commercial paper market seized up after Penn Central, the largest rail-road company at that time, collapsed . The fact that the Fed has acted in a similar manner now , tells us how seriously it believes the financial system is at risk.
Our markets had run up on Friday on a word of assurance from S&P that woes of the banks having to provide for bad home loans were coming to an end as the banks may not have to provide for more than $ 285 billion, as against expectations of $265 billion at the beginning of the year.
I beg to differ from the view that S&P has given.
While the agency definitely understands economics and the US economy much better than an arm chair economist like me , sitting half away across the globe, the comment may have come a tad too soon.
To draw a kind of line the S&P has drawn, the first assumption it has to make is that home prices in the US will not deteriorate more from here. Any one with the faintest idea of property markets will agree that once the trend changes it takes many years for it start reversing. Lessons learnt from Japanese property markets should not be forgotten too soon. Even 18 years after the property bubble in Japan, prices have not reached the zenith seen in early nineties..
Secondly, despite the fed slashing rates, the mortgage rates have not fallen as much. In fact, the rates of a 30 year mortgage have risen by 0.50% in the last one month, though the Fed has cut rates by 1.25% in the past six weeks.
Thirdly, the banks have tightened the norms further. Essentially it is the desire to play safe, which is preventing the banks to lend aggressively the way they did earlier.
The credit contraction has moved well past its sub-prime mortgage starting point and is currently reaching a whole array of other credit instruments from commercial real estate and leveraged buy-out loans, to consumer receivables and credit default swaps. Anyone still discussing sub-prime means that he must have stopped reading the papers in 2008.
Rating agencies have been awfully behind the curve at all times. As they have a business to run, don't expect them to start bad-mouthing customers who can still pay rating fees. As always, such reports will come out only after the customers are clinically dead and fee-less.
Expect the markets to open the week on a weak note. Advance figures that will come Monday are unlikely to enthuse the markets. The only hope the markets have is the rate cut in the US, which could be 0.75% or a full 1% on Tuesday. A section of the markets would be looking to sell in the enthusiasm post the rate cut as no one would like to keep open positions during the longest weekend, Dalal Street has seen in many years.
Rohit
India: Getting Bankrupt With Montek, Man and PC At The Helm?
Rising Crude: Alternatives For GOI
Elections, Inflation and Bankruptcy
-Raise significantly, by atleast 20-30 per cent the price of Petrol and
Diesel.
-If it is done, Inflation rate will rise from 7.8 per cent to 12.8 per cent.
-Risk Withdrawal of support from Commies and Mayawati, and hence lose Delhi.
-Lose All State Elections that ensue in 2008 and the General Elections that
follow by mid summers.
-Do Nothing-Reverse FX flows, Ensure Rupee falls to Rs 75 to a dollar and Rs
150 to a pound and make GDP growth go negative and the Nation Bankrupt, just as
was the situation in the tenure of VP Singh and make Man take Gold for pledging
to the Swiss/IMF/World Bank combine just like he did in 1991.
Indian oil basket scaled $127/bbl on May 22. Yet the Indian consumer
continues
to pay an equivalent of $48.3/ bbl for auto fuels, kerosene and cooking gas.
What's more is that he will pay even lesser ie $38/bbl effectively in FY09 if
no price increase/ duty cuts take place!!
It must be noted that all three previous oil price spikes led to political
and/or economic crises, ie in 1973-75, 1979-80 and 1990-91. Can India remain
unscathed this time?
If oil prices sustain at these levels CAD will climb to an unprecedented level
of >3% of GDP while off-balance sheet issuances will scale ~5% of GDP - a
situation that could put downward pressure on INR & reverse Fx accumulation and
lower growth.
We have tried to explore the policy options of a govt that has its back to the
wall given unprecedented oil prices, high inflation and slowing growth besides 7
state elections in the run-up to General Elections in 2009.
We have quantified the implications of various policy options that the govt may
exercise.
Nothing in this article is, or should be construed as, investment advice.
Rohit
Elections, Inflation and Bankruptcy
-Raise significantly, by atleast 20-30 per cent the price of Petrol and
Diesel.
-If it is done, Inflation rate will rise from 7.8 per cent to 12.8 per cent.
-Risk Withdrawal of support from Commies and Mayawati, and hence lose Delhi.
-Lose All State Elections that ensue in 2008 and the General Elections that
follow by mid summers.
-Do Nothing-Reverse FX flows, Ensure Rupee falls to Rs 75 to a dollar and Rs
150 to a pound and make GDP growth go negative and the Nation Bankrupt, just as
was the situation in the tenure of VP Singh and make Man take Gold for pledging
to the Swiss/IMF/World Bank combine just like he did in 1991.
Indian oil basket scaled $127/bbl on May 22. Yet the Indian consumer
continues
to pay an equivalent of $48.3/ bbl for auto fuels, kerosene and cooking gas.
What's more is that he will pay even lesser ie $38/bbl effectively in FY09 if
no price increase/ duty cuts take place!!
It must be noted that all three previous oil price spikes led to political
and/or economic crises, ie in 1973-75, 1979-80 and 1990-91. Can India remain
unscathed this time?
If oil prices sustain at these levels CAD will climb to an unprecedented level
of >3% of GDP while off-balance sheet issuances will scale ~5% of GDP - a
situation that could put downward pressure on INR & reverse Fx accumulation and
lower growth.
We have tried to explore the policy options of a govt that has its back to the
wall given unprecedented oil prices, high inflation and slowing growth besides 7
state elections in the run-up to General Elections in 2009.
We have quantified the implications of various policy options that the govt may
exercise.
Nothing in this article is, or should be construed as, investment advice.
Rohit
The US In Long, Deep Recession, But Mr. Buffett Will Still Invest In
The United States is already in a recession and it will be longer as well as
deeper than many people expect, U.S. investor Warren Buffett said in an
interview published in German magazine Der Spiegel on Saturday.
He said the United States was "already in recession" and added: "Perhaps not
in the sense that economists would define it" with two consecutive quarters of
negative growth. "But the people are already feeling the effects," said Buffett,
the world's richest man. "It will be deeper and last longer than many think."
But he said that won't stop him from investing in selected companies and said
he remained interested in well-managed German family-owned companies. "If the
world were falling apart I'd still invest in companies," he said.
Buffett also renewed his criticism of derivatives trading.
"It's not right that hundreds of thousands of jobs are being eliminated, that
entire industrial sectors in the real economy are being wiped out by financial
bets even though the sectors are actually in good health."
Buffett complained about the lack of effective controls. "That's the problem,"
he said. "You can't steer it, you can't regulate it anymore. You can't get the
genie back in the bottle
ROhit
deeper than many people expect, U.S. investor Warren Buffett said in an
interview published in German magazine Der Spiegel on Saturday.
He said the United States was "already in recession" and added: "Perhaps not
in the sense that economists would define it" with two consecutive quarters of
negative growth. "But the people are already feeling the effects," said Buffett,
the world's richest man. "It will be deeper and last longer than many think."
But he said that won't stop him from investing in selected companies and said
he remained interested in well-managed German family-owned companies. "If the
world were falling apart I'd still invest in companies," he said.
Buffett also renewed his criticism of derivatives trading.
"It's not right that hundreds of thousands of jobs are being eliminated, that
entire industrial sectors in the real economy are being wiped out by financial
bets even though the sectors are actually in good health."
Buffett complained about the lack of effective controls. "That's the problem,"
he said. "You can't steer it, you can't regulate it anymore. You can't get the
genie back in the bottle
ROhit
Inflation Figures
Morgan Stanley-India Research
Risk of Growth Dipping Below Potential Trend (2H08 - ??)
-GOI finances in total disarray.
-BOP in a mess.
-Fiscal Deficit closer to 10 per cent.
-Current Account Deficit closer to 3.5 per cent.
-RBI should stop messing around with CRR and raise interest rates.
-First time in 4 years, Real Interest Rates on Bank Deposits are negative,
that is interest paid is lower than annual inflation rate.
-Falling Rupee and lack of infrastructure imply growth at 9 per cent is simply
unsustainable.
-Millions of unemployed are a problem, rather than a demographic positive.
-Inflation to reduce and curtail spending power of the low and middle income
groups.
While growth has already reverted to more sustainable levels, the global
macroenvironment could force a further slowdown. Just as during the years
2005-07, strong positive global factors supported India's growth above its
then-sustainable growth trend, negative global factors are now threatening to
pull its growth below the potential.
The most important adverse factor is the global commodity price trend. While
India is self-sufficient in steel and aluminium, it is heavily dependent on
imported copper (concentrate), coking coal, edible oils, and, most important,
crude oil.
Even for commodities where the country is self-sufficient, market-oriented
pricing means some indirect pressure on domestic pricing of global commodity
products is inevitable. This is evident in the recent spike in prices for
domestic steel, iron ore, and certain food products.
Rising oil prices continue to be a big challenge for the country. India
imports about 70% of its crude oil and refined products requirements. A roughly
US$10/bbl increase in crude oil prices results in higher imports, trade deficit,
and current account deficit of US$7 billion (0.6% of GDP).
With the government having increased domestic fuel prices by only 26% for
petrol and 34% for diesel (average for the country) over the last four years
during the period in which international crude oil prices have shot up about
225% to US$129/bbl currently, the subsidy burden continues to spike.
In F2009 (12 months ending March 2009), if crude oil prices average
US$120/bbl, we believe the oil subsidy (including the burden on oil companies)
will increase to US$40 billion (3.3% of GDP).
As per our Oil and Gas analyst Vinay Jaising, domestic oil products are marked
to an implied average of US$65/bbl. If the government were to hike domestic
product prices to market, inflation would rise by about 6.9% points.
Even without the increase in domestic oil prices, the rise in other commodity
prices has already pushed inflation to close to a three and one-half-year high
of 7.8% during the week ended May 3, 2008 and the fiscal deficit (including
off-budget expenditures) to a five-year high.
The depreciation of the rupee will only add to the inflation pressures. The
inflation challenge is holding the Central Bank back from initiating much-needed
policy rate cuts. Higher inflation will slow spending by low- and middle-income
groups.
The increased global risk aversion and shrinking leverage of the financial
institutions will also affect the international funding plans of Indian
companies. Capital inflows into EMs and therefore into India could also slow.
Rohit
Risk of Growth Dipping Below Potential Trend (2H08 - ??)
-GOI finances in total disarray.
-BOP in a mess.
-Fiscal Deficit closer to 10 per cent.
-Current Account Deficit closer to 3.5 per cent.
-RBI should stop messing around with CRR and raise interest rates.
-First time in 4 years, Real Interest Rates on Bank Deposits are negative,
that is interest paid is lower than annual inflation rate.
-Falling Rupee and lack of infrastructure imply growth at 9 per cent is simply
unsustainable.
-Millions of unemployed are a problem, rather than a demographic positive.
-Inflation to reduce and curtail spending power of the low and middle income
groups.
While growth has already reverted to more sustainable levels, the global
macroenvironment could force a further slowdown. Just as during the years
2005-07, strong positive global factors supported India's growth above its
then-sustainable growth trend, negative global factors are now threatening to
pull its growth below the potential.
The most important adverse factor is the global commodity price trend. While
India is self-sufficient in steel and aluminium, it is heavily dependent on
imported copper (concentrate), coking coal, edible oils, and, most important,
crude oil.
Even for commodities where the country is self-sufficient, market-oriented
pricing means some indirect pressure on domestic pricing of global commodity
products is inevitable. This is evident in the recent spike in prices for
domestic steel, iron ore, and certain food products.
Rising oil prices continue to be a big challenge for the country. India
imports about 70% of its crude oil and refined products requirements. A roughly
US$10/bbl increase in crude oil prices results in higher imports, trade deficit,
and current account deficit of US$7 billion (0.6% of GDP).
With the government having increased domestic fuel prices by only 26% for
petrol and 34% for diesel (average for the country) over the last four years
during the period in which international crude oil prices have shot up about
225% to US$129/bbl currently, the subsidy burden continues to spike.
In F2009 (12 months ending March 2009), if crude oil prices average
US$120/bbl, we believe the oil subsidy (including the burden on oil companies)
will increase to US$40 billion (3.3% of GDP).
As per our Oil and Gas analyst Vinay Jaising, domestic oil products are marked
to an implied average of US$65/bbl. If the government were to hike domestic
product prices to market, inflation would rise by about 6.9% points.
Even without the increase in domestic oil prices, the rise in other commodity
prices has already pushed inflation to close to a three and one-half-year high
of 7.8% during the week ended May 3, 2008 and the fiscal deficit (including
off-budget expenditures) to a five-year high.
The depreciation of the rupee will only add to the inflation pressures. The
inflation challenge is holding the Central Bank back from initiating much-needed
policy rate cuts. Higher inflation will slow spending by low- and middle-income
groups.
The increased global risk aversion and shrinking leverage of the financial
institutions will also affect the international funding plans of Indian
companies. Capital inflows into EMs and therefore into India could also slow.
Rohit
ET: Petrol Prices May Be Raised By Rs 10 to Rs 16 a litre. Expect In
Petrol, a fuel used primarily by urban consumers, could soon be selling at
market prices. This would mean an increase of Rs 10-16 per litre at current
prices.
Officials told ET that a proposal to sell petrol at market prices, while keeping
diesel, cooking gas and kerosene at subsidised rates was under consideration.
According to a Union minister, some Cabinet members are in favour of
market-determined petrol prices. The Cabinet is likely to take up the proposal
at a meeting soon, which will discuss a bailout package for state-owned oil
marketers.
“With crude oil prices breaching $132/barrel, nothing can be ruled out in the
domestic market. Some members in the Cabinet favour prices of petrol to be
market-determined, while regulating prices of diesel, cooking gas and PDS
kerosene to safeguard the poor and avoid stoking inflation,” he said.
“I strongly believe that subsidising petrol not only encourages its misuse but
also discourages use of public transport. Having a market-determined price would
help in the survival of oil cos without any significant inflationary impact. The
poor, anyway, don’t use personal vehicles,” added another Cabinet minister. He
added that there were other members with similar views.
Also Read
Ã
US now attributes high oil prices to demand in India, China
Ã
Food vs fuel: Let free markets work
Ã
What drives crude oil prices?
Ã
Biofuel: Search on for a credible alternative
The idea has also been mooted by the working group on petroleum & natural gas
sector for the formulation of the XI Plan. In its report, the group chaired by
petroleum secretary MS Srinivasan had said: “In the case of both petrol and
diesel, regular and small adjustments in price are recommended, failing which we
may be forced to correct prices in one go, bringing about a price shock.
Furthermore, if we are to reduce consumption of oil products, price signals must
be transmitted to consumers so that they can make adjustments on their side as
well.”
While there is a case for petrol, a similar move is not recommended for diesel
due to its impact on inflation, the member said. According to an internal oil
ministry exercise, petrol has insignificant weightage in the wholesale price
index (WPI). The WPI consists of three major groups — primary articles (with
22.02% weightage), manufactured products (63.75% weightage) and fuel, power,
light and lubricants (14.23% weightage).
The third group is subdivided into three categories with following weightage
assigned — coal mining (1.75%), electricity (5.49%) and mineral oil (6.99%).
Among the mineral oil category, diesel has the highest weightage of 2.02%,
followed by LPG (1.88%). Petrol has only 0.88% weightage, an official source
said.
A senior official in the oil ministry has said the Cabinet would meet soon to
help public sector oil companies — IOC, BPCL and HPCL — offset losses. “The
Cabinet agenda is yet to be finalised and it will contain all options including
a price increase and a duty rejig. The oil ministry has so far, not specified
any quantum of fuel price hike. It is a political decision and it is up to the
Cabinet to decide,” he said.
Nothing in this article is, or should be construed as, investment advice.
Rohit
market prices. This would mean an increase of Rs 10-16 per litre at current
prices.
Officials told ET that a proposal to sell petrol at market prices, while keeping
diesel, cooking gas and kerosene at subsidised rates was under consideration.
According to a Union minister, some Cabinet members are in favour of
market-determined petrol prices. The Cabinet is likely to take up the proposal
at a meeting soon, which will discuss a bailout package for state-owned oil
marketers.
“With crude oil prices breaching $132/barrel, nothing can be ruled out in the
domestic market. Some members in the Cabinet favour prices of petrol to be
market-determined, while regulating prices of diesel, cooking gas and PDS
kerosene to safeguard the poor and avoid stoking inflation,” he said.
“I strongly believe that subsidising petrol not only encourages its misuse but
also discourages use of public transport. Having a market-determined price would
help in the survival of oil cos without any significant inflationary impact. The
poor, anyway, don’t use personal vehicles,” added another Cabinet minister. He
added that there were other members with similar views.
Also Read
Ã
US now attributes high oil prices to demand in India, China
Ã
Food vs fuel: Let free markets work
Ã
What drives crude oil prices?
Ã
Biofuel: Search on for a credible alternative
The idea has also been mooted by the working group on petroleum & natural gas
sector for the formulation of the XI Plan. In its report, the group chaired by
petroleum secretary MS Srinivasan had said: “In the case of both petrol and
diesel, regular and small adjustments in price are recommended, failing which we
may be forced to correct prices in one go, bringing about a price shock.
Furthermore, if we are to reduce consumption of oil products, price signals must
be transmitted to consumers so that they can make adjustments on their side as
well.”
While there is a case for petrol, a similar move is not recommended for diesel
due to its impact on inflation, the member said. According to an internal oil
ministry exercise, petrol has insignificant weightage in the wholesale price
index (WPI). The WPI consists of three major groups — primary articles (with
22.02% weightage), manufactured products (63.75% weightage) and fuel, power,
light and lubricants (14.23% weightage).
The third group is subdivided into three categories with following weightage
assigned — coal mining (1.75%), electricity (5.49%) and mineral oil (6.99%).
Among the mineral oil category, diesel has the highest weightage of 2.02%,
followed by LPG (1.88%). Petrol has only 0.88% weightage, an official source
said.
A senior official in the oil ministry has said the Cabinet would meet soon to
help public sector oil companies — IOC, BPCL and HPCL — offset losses. “The
Cabinet agenda is yet to be finalised and it will contain all options including
a price increase and a duty rejig. The oil ministry has so far, not specified
any quantum of fuel price hike. It is a political decision and it is up to the
Cabinet to decide,” he said.
Nothing in this article is, or should be construed as, investment advice.
Rohit
Tour. Fin. Corp.Ltd - Earlier Report by Sharekhan
Company details
TFCI decides to adopt the QIP route
Tourism Finance Corporation of India (TFCI) has announced its plans to issue 3.3 crore equity shares by way of preferential or qualified institutional placement to qualified institutional investors. The issue price has not been decided yet but the price would not be lower than the floor price to be calculated in accordance with relevant Securities and Exchange Board of India (SEBI) guidelines. Based on prevailing market prices the SEBI price comes to Rs38. The capital raising plan is in line with our estimates and hence we have not revised our numbers.
The business fundamentals of the company have improved significantly in the past one year on the back of the capacity expansion planned in the hotel and tourism sectors for the next three to four years. We expect TFCI’s earnings to grow at a compounded annual growth rate of 50% over the period FY2007-10, as it will undertake much higher volume of business after its capital raising exercise in FY2008. At the current market price of Rs42.6, the stock is quoting at 12.6x FY2009E earnings and 1.2x FY2009E book value. We are currently placing a Hold on the stock with a price target of Rs47.
- Price target: Rs47
- Market cap: Rs287 cr
- 52 week high/low: Rs47/10.5
- NSE volume: 5.9 lakh
(No of shares) - BSE code: 526650
- NSE code: TFCILTD
- Sharekhan code: TFCI
- Free float: 4.0 cr
(No of shares)
Shareholding pattern
| Price performance | ||||
| (%) | 1m | 3m | 6m | 12m |
| Absolute | 30.5 | 18.2 | 179.4 | 318.1 |
| Relative to Sensex | 34.2 | 1.0 | 108.4 | 189.6 |
TFCI decides to adopt the QIP route
Tourism Finance Corporation of India (TFCI) has announced its plans to issue 3.3 crore equity shares by way of preferential or qualified institutional placement to qualified institutional investors. The issue price has not been decided yet but the price would not be lower than the floor price to be calculated in accordance with relevant Securities and Exchange Board of India (SEBI) guidelines. Based on prevailing market prices the SEBI price comes to Rs38. The capital raising plan is in line with our estimates and hence we have not revised our numbers.
Our estimates factor in capital raising of Rs125 crore in FY2008
TFCI’s current capital base restricts it from bidding for projects in the range of Rs40-50 crore. Hence, to expand its capital base, it is currently considering raising capital from the primary market. We have factored in a capital raising of Rs125 crore by the company in FY2008 at an issue price of Rs42. Based on our issue price and shares to be issued by the company, around Rs137 crore is going to be mobilised which is not going to materially impact our estimates. Hence, we would revisit our numbers after further details regarding the placement are made available.
Future growth prospects remain robust
TFCI is extremely well positioned to benefit from the upturn in the hotel and tourism sectors. The future positives for the company are stated below:
- The robust outlook for the hotel and tourism sectors is directly going to benefit the company, as it is present in the niche segment of financing hotel and tourism sector projects only.
- The enhanced capital base post-placement will allow TFCI to bid for higher projects. This will lead to higher growth in the balance sheet, as the company would be able to leverage the increase in the equity base. All this will ultimately result in higher earnings growth.
- The asset quality of TFCI has improved significantly with almost nil net non-performing assets. This has resulted in lower provisioning requirements and improved profitability.
- The likely launch of a $100-million private equity fund by the company in FY2009 to cater to the hotel and tourism sectors should further enhance its fee income and return on equity (RoE).
- The newfound interest of investors in financial service companies like IFCI in recent times goes to show that investors’ appetite for such stocks is huge. Again, considering the small size of the issue and the niche segment the company caters to, raising funds should not be a difficult task.
The business fundamentals of the company have improved significantly in the past one year on the back of the capacity expansion planned in the hotel and tourism sectors for the next three to four years. We expect TFCI’s earnings to grow at a compounded annual growth rate of 50% over the period FY2007-10, as it will undertake much higher volume of business after its capital raising exercise in FY2008. At the current market price of Rs42.6, the stock is quoting at 12.6x FY2009E earnings and 1.2x FY2009E book value. We are currently placing a Hold on the stock with a price target of Rs47.
| Valuation table | |||||
| Year to 31 March | FY09E | FY08E | FY07 | FY06 | FY05 |
| Net profit (Rs cr) | 32.8 | 19.5 | 14.3 | 11.9 | 14.2 |
| Shares in issue (cr) | 9.7 | 9.7 | 6.7 | 6.7 | 6.7 |
| EPS (Rs) | 3.4 | 2.0 | 2.1 | 1.8 | 2.1 |
| EPS growth (%) | 0.7 | -0.1 | 0.2 | -0.2 | 0.1 |
| PE (x) | 12.6 | 21.2 | 20.1 | 24.2 | 20.2 |
| Book value (Rs/share) | 36.8 | 33.9 | 28.2 | 27.4 | 25.6 |
| P/BV (x) | 1.2 | 1.3 | 1.5 | 1.6 | 1.7 |
| Adjusted book value (Rs/share) | 36.5 | 33.5 | 28.2 | 25.2 | 15.4 |
| P/ABV (x) | 1.2 | 1.3 | 1.5 | 1.7 | 2.8 |
| RONW (%) | 9.5 | 6.5 | 7.6 | 6.6 | 8.4 |
3iinfotech - Earlier Report by Sharekhan
Company details
Valuation
To fine tune our earning estimates, we have revised up the earning estimates for FY2009 by 3.4% and have introduced FY2010 earning estimates. Our earning estimates does not incorporate Regulus acquisition since regulatory approval for the same is yet to be obtained. At the current market price, the stock is trading at 9.8x FY2009 and 8.4x FY2010 earning estimates. We maintain our Buy recommendation on the stock with price target of Rs180.
ROhit
- Price target: Rs180
- Market cap: Rs1,715 cr
- 52 week high/low: Rs165/84
- NSE volume: 4.6 lakh
(No of shares) - BSE code: 532628
- NSE code: 3IINFOTECH
- Sharekhan code: 3IINFOTECH
- Free float: 7.9 cr
(No of shares)
- 3i Infotech''s consolidated revenues grew by 10.3% quarter on quarter (qoq) and 66.5% year on year (yoy) to Rs349.9 crore in Q4FY2008. While, the organic revenue growth was 7.1% sequentially, acquisitions contributed 3.2% to the sequential growth in the top line during the quarter.
- The operating profit margin (OPM) was flat at 24.8% in Q4FY2008. The operating profit grew 9.9% qoq to Rs86.7 crore during the quarter.
- The company''s net profit grew by 0.6% to Rs48.8 crore, which was below our expectation of Rs53.7 crore. This was primarily due to lower than expected other income on account of foreign exchange mark-to-market losses in foreign currency convertible bonds (FCCBs). The company reported other income of Rs2.2 crore during the quarter compared to Rs6.1 crore in the previous quarter.
- For FY2009, the company guided a top line growth of 40% to ~Rs1,700 crore and an earning growth of around 30%, leading to a fully diluted earnings per share (EPS) of Rs13-Rs13.5. The guidance has factored in only the organic growth and the fully diluted capital including FCCBs.
- The company proposed a dividend of Rs1.5 per share for FY2008.
- 3i Infotech acquired Regulus for $80 million. Regulus generated sales of $148 million and earnings before interest, depreciation, tax and amortisation (EBITDA) of $20 million in CY2007. The acquisition is funded through syndicated loans with interest rate of Libor plus the premium (base rate of 7%). The company has acquired Regulus at attractive valuation of enterprise value (EV)/EBITDA of 4.0x CY2007. The acquisition appears to be cash accretive since this will directly contribute ~$15 million (EBITDA of $20 million-interest expenses of $5.6 million [7% on $80 million]) to the bottom line next year.
- To fine tune our earning estimates, we have revised our FY2009 earning estimates by 3.4% and have introduced FY2010 earning estimates in this note. At the current market price, the stock is trading at 9.8x FY2009 and 8.4x FY2010 earning estimates. We maintain our Buy recommendation on the stock with price target of Rs180.
Shareholding pattern
| Price performance | ||||
| (%) | 1m | 3m | 6m | 12m |
| Absolute | 34.5 | 13.1 | -1.9 | -11.5 |
| Relative to Sensex | 21.7 | 15.4 | 12.3 | -29.6 |
| Result table | Rs (cr) | ||||
| Particular | Q4FY08 | Q4FY07 | Q3FY08 | yoy (%) | qoq (%) |
| Net sales | 349.9 | 210.2 | 317.3 | 66.5 | 10.3 |
| Software development cost | 185.9 | 112.2 | 168.4 | 65.6 | 10.4 |
| Gross profit | 164.0 | 98.0 | 148.8 | 67.4 | 10.2 |
| SG&A expenses | 77.3 | 45.5 | 70.0 | 69.9 | 10.4 |
| Total operating cost | 263.2 | 157.7 | 238.4 | 66.9 | 10.4 |
| Operating profit | 86.7 | 52.5 | 78.8 | 65.2 | 9.9 |
| Software development cost | 12.1 | 7.3 | 12.0 | - | 1.5 |
| Other income | 2.2 | 0.8 | 6.1 | 184.3 | -64.2 |
| Interest | 14.2 | 6.1 | 13.0 | 131.9 | 9.6 |
| Depreciation | 8.0 | 5.8 | 6.4 | 37.6 | - |
| PBT | 54.5 | 34.0 | 53.6 | 60.4 | 1.7 |
| Provision for tax | 4.3 | 2.0 | 4.0 | - | - |
| Tax | 4.3 | 1.2 | 6.0 | 268.5 | -28.2 |
| Deferred tax | 0.0 | 0.8 | -2.1 | - | - |
| Net Profit | 50.2 | 32.0 | 49.6 | 56.7 | 1.1 |
| Extra-ordinary items | 0.0 | | 0.0 | - | - |
| Less: Minority interest | 1.4 | 0.2 | 1.2 | - | - |
| RPAT | 48.8 | 32.2 | 48.5 | 51.6 | 0.7 |
| Equity capital | 130.5 | 56.3 | 129.9 | | |
| EPS (Rs) | 3.7 | 5.7 | 3.7 | | |
| Margins (%) | |||||
| GPM | 46.9 | 46.6 | 46.9 | | |
| OPM | 24.8 | 25.0 | 24.8 | | |
| NPM | 14.4 | 15.2 | 15.6 | ||
Regulus acquisition—Cash accretive
3i Infotech announced that it has acquired Regulus for $80 million. Regulus generated sales of $148 million and EBITDA of $20 million in CY2007. The acquisition is funded through syndicated loans with interest rate of Libor plus the premium (base rate of 7%). The company has acquired Regulus at attractive valuation of EV/EBITDA of 4.0x CY2007. The acquistion appears to cash accretive since this will directly contribute ~$15 million (EBITDA of $20 million--interest expenses of $5.6 million) to the bottom line next year. While, Regulus provides processing services to (Banking, finance, services and insurance) BFSI clients, J&B software is the product company for BFSI. By combining services of both these companies, 3i Infotech is targeting $25 million revenue from India over the next two-three year period.
However, we have not incorporated Regulus acquisition in our earning estimates since the regulatory approval for the acquisition is still pending. The company expects the approval process to take 30-120 days.
Segmental performance
After a muted performance last quarter, the company registered an impressive 11.7% sequential growth in the service revenues. This was largely on account of increased traction in business process outsourcing (BPO) services. Products revenues during the quarter also grew by 9% qoq to Rs179.6 crore during the quarter. Moving ahead, the company expects IT services, products and BPO services to contribute equally to the revenue in the next two to three year period.
| Revenues mix | |||||
| (Rs cr) | Q4FY08 | Q4FY07 | Q3FY08 | yoy (%) | qoq (%) |
| Products | 179.6 | 107.6 | 164.8 | 66.9 | 9.0 |
| Services | 170.3 | 102.6 | 152.4 | 65.9 | 11.7 |
| Total | 349.9 | 210.2 | 317.3 | 66.4 | 10.3 |
Service business margin improvement offset product business margin decline
A 10-basis-point decline in the gross margin of the product business was offset by a 20-basis-point improvement in the gross margin of the services business. Hence, the overall gross margin was flat during the quarter.
| Margins | |||||
| (Rs cr) | Q4FY08 | Q4FY07 | Q3FY08 | yoy (%) | qoq (%) |
| Products | 98.5 | 58.0 | 90.4 | 69.9 | 9.0 |
| Services | 65.5 | 40.0 | 58.4 | 63.7 | 12.1 |
| Total gross profit | 164.0 | 98.0 | 148.8 | 67.4 | 10.2 |
| GPM (%) | |||||
| Products | 54.8 | 53.9 | 54.9 | ||
| Services | 38.5 | 39.0 | 38.3 | ||
Order backlog continues to be healthy
The order backlog grew 10.2% qoq to Rs864.7 crore on account of strong growth in the services order backlog. The services order backlog grew 13.8% qoq to Rs475 crore on the back of increased focus in the transaction services business.
| Order backlog | |||||
| (Rs cr) | Q4FY08 | Q4FY07 | Q3FY08 | yoy (%) | qoq (%) |
| Products | 389.7 | 277.8 | 367.2 | 40.3 | 6.1 |
| Services | 475.0 | 290.9 | 417.3 | 63.3 | 13.8 |
| Total | 864.7 | 568.7 | 784.5 | 52 | 10.2 |
To fine tune our earning estimates, we have revised up the earning estimates for FY2009 by 3.4% and have introduced FY2010 earning estimates. Our earning estimates does not incorporate Regulus acquisition since regulatory approval for the same is yet to be obtained. At the current market price, the stock is trading at 9.8x FY2009 and 8.4x FY2010 earning estimates. We maintain our Buy recommendation on the stock with price target of Rs180.
| Valuation table | Rs (cr) | |||
| Paticulars | FY2007 | FY2008 | FY2009E | FY2010E |
| Net sales (Rs cr) | 655.3 | 1205.3 | 1720.3 | 2142.0 |
| Adj net profit (Rs cr) | 98.0 | 169.4 | 223.8 | 260.2 |
| Share in issue (cr) | 13.5 | 16.6 | 16.6 | 16.6 |
| EPS (Rs) | 7.3 | 10.2 | 13.5 | 15.7 |
| % yoy growth | - | 40.6 | 32.1 | 16.3 |
| PER (x) | 18.2 | 12.9 | 9.8 | 8.4 |
| Book value (Rs) | 56.4 | 102.9 | 115.6 | 130.6 |
| P/BV (x) | 2.3 | 1.3 | 1.1 | 1.0 |
| EV/Ebidta (x) | 8.1 | 5.2 | 4.2 | 3.6 |
| Dividend yield (%) | 1.5 | 1.1 | 1.5 | 1.5 |
| RoCE (%) | 11.4 | 12.4 | 14.6 | 15.4 |
| RoNW (%) | 13.7 | 10.7 | 12.5 | 12.8 |
ROhit
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