India Morning Report: A sudden rush for crossing 6350, nipped again

Corus trein 823 Tata Steel train
Corus trein 823 Tata Steel train (Photo credit: Wikipedia)

The Banking system’s woes are fresh wounds , blisters nary a bluster with NPAs at most PSU banks except BOI and PNB likely to cross 5% on Net level. Despite market’s favour for State Bank vintage in equity markets , the SBI scrip may provide most fuel for the Domestic Institutions who prejudicedly also treat the scrip as the holy grail along with operators. As we noted earlier within this fortnight, the results showing bolstered by reduced provisions for banks generating PAT growth mid year is a mirage.

Apart from the fact that NPA and AFS loss impacts have been spread over the remaining two quarters to March 2014, provisioning may be updated one shot by FY14 at all such banks and as yields continue above 9% the results will speak for themselves.

However, that is not the reason to be bearish at 6200 levels, neither is the bluster on ITC and Tata Steel by Network analysts likely to bring markets back to last week’s 6000 levels again. ITC is a good trade and Tata Global and Tata Steel seem to be capped for now. AS expected, YES BBank has moved on trading supports and IDFC is also maintaining 108 levels instead of 100 a week ago

Results from Sun Pharma last week, though not the digital upstarts like Sun Tv (SpiceJet) and Dish TV (reported today) are likely tobring rosiness back to the markets. One winner as markets tie of the Maruti move at 1700 levels will be Biocon, both scrips from disparate sectors, especially found in favor in Institutional and ALt trades looking for the India  Shining flavor along with the alpha ( which undoubtedly is missing in both stories) However a rerating further upward is likely only for Sun Pharma, having posted 58% growth on last September and having grown some claws at long last in the Indian Domestic market and margins of 33% (ex-Protonix) are good for the mile. Six month FY 14 EBITDA margins are a healthy 44% and the stock can well bring Cipla and the Midcaps out as well into more international baskets. R&D spend is likely to increase in the Indian markets in the short to medium term but current provisions, reasonable as % of sales are not good for a longer brush in the generics and domestic markets. A lot of those investments across the rest of the industry are likely lost in Process repair having been cut by FDA riding them even as Brownfield investments in the quarter exceeded $1.1 Bln and guidelines have been further revised allowing more such investment again.

India Morning Report: A backward state card for Nomura, A Gross Margin push for Tata Steel

corus / Tata steel IJmuiden velsen beverwijk
corus / Tata steel IJmuiden velsen beverwijk (Photo credit: Wikipedia)

 

In what is probably the best cause of us investment bankers in this lackluster market for a lackluster Economy, Nomura Securities, took the sitting bull by the horns in an almost sleepy downgrade of Indianomics come Wednesday as markets opened to 57000 levels, positive inner rumblings in the Bank nifty and a new move in a new OTM opportunity in Infosys.

 

Almost seems like it was 2007 or 2008 once again depending on where you were and yes we are at the fag end of the India opportunity cycle where we have rid ourselves of all our lofty notions of infrastructure or credit growth and consumption is finally about to break down as job prospects are also at an all time low. capex however is not constrained as a lot of quality companies are growing their cash pile, not a shot in the dark but wrought on by the end of the downturn for many investment intensive businesses seen in this cycle and the Services sector dipping which has been the last port of call for the blues has been known to bounce back much better. For otherwise achieving Nomura’s new 5.5% target is going to be even more difficult. Bihar’s leaning to the uPA may provide stable government as well as a new cause for double digit economic improvements in the next edition of India Inc as we reach another anniversary of our independence.

 

Tata steel’s quarterly results are an even better segue way to India’s latest Morning trades. Th EBITDA has infact hit double digits and even after the corrections on the 90% profit improvement this quarter a 30% return on Domestic production of Steel in EBITDA is really creditable as the margins have indeed been saved on the year. You do see robustness returning to the sector as a whole with both Hindalco and Tata Steel not just surviving the sharp negative eigenvalues for the metals sector globally but showing that India can survive as the biggest players left in the huge resource industries which could otherwise be surmised to be left to India as the unwilling last man holding the Bowl in Steel and later in Shale, our last foreign forays.

 

Gold duties will have a desired effect as controls deliver immediate results to Indian policymakers in the amorphous International borders and that is perhaps an uncomfortable reminder to us to  even consider a return to strong controls and slip out of the “liberalised” reforms on offer from on of the two largest nation states out there.  we just have to keep Gold imports to 50 tonnes over each of the remaining 8 months to make the new Finance Ministers’ targets for the metal at 800 MT this year. Recovery in Global steel is likely to continue and Tata Steel is a very good investment with continuing margin safety in India, more capacities and better $50 EBITDA realisations in Europe as well, an unexpected Bonanza.

 

The coming move in Infosys will sign off on the creamy 10% extra in profits to it exporters after having absorbed inane inefficiencies and market volatility in the first round of depreciation of 10% in June as the rupee gets ready for another ride from 61.5 levels to 65 near the oil purchase date for India’s importers this month

 

Unfortunately after the great start at 895 for ICICi, 1150 for Axis and 313 for YES Bank, the secttoral index has again retreated to near 10k levels waiting for the inevitable jump but foregoing the move for today till another robust oportunity presents itself for a material move.

 

 

 

India Morning Report: Another Week, Another Level (5650)

The week closed right 2 points next to the week before last levels on the Nifty and the Bank nifty is technically still able to maintain 11600 levels at its current 11585 banknifty score. The result, humdrum existence for those who thrived on the growth in India inc translating into indices moving up in a definite trend if not by leaps and bounds. An humdrum existence probably made interesting by surgical precision of tv series’ characters in our “day to day lives”  including the clinical refusal to a date for candle light dinner with hubby dears like us.

 

Anyway, equally critical and probably funny is how another batch of shorts is out from market practitioners in a clear derisory preview of a Monday which should be extremely bullish at its key 5650 support on a Monday in the beginning of a series after such a reshuffle. It is likely my bet that the markets are up a 100 points on the Sensex today but that has been precluded by any such move likely snowballing in such aforementioned general climate into a 450 point move or the Nifty similarily running up closer to 90 points. The unlikeliness of the NIfty moiving into such comfortable orbits makes today’s moves limited. Of course there is a faint probability and thus a skew in the favor of a definite move down in terms of risk rewards because of the low probability, which means markets decide to take the south direction today for keeps is rather unlikely fortunately and not unfortunately as followers of risk reward charts might imagine.

 

Really if you deciphered that all, you are likely still less bright than my daughter whose schools reopen tomorrow as markets continue in a range bound equation for the growth in EBITDA this quarter which the TOI reports at 27% for index companiies having reported and includes FMCG and Cement while not giving the thumbs up to the 20% deprecation led 30% eyarly growth in IT and Pharma revenues. Net result, no picks are good for bigger and better exposures in ICICIBANK, IDFC and YESBANK which remain winners of the trend to Indian victory equation (Political and Business largesse and influence on the region)

 

And apparently I would not be inventing any quantitative constructs for such clear diction ona complexly meandering subject when I do start my fellowship at Bangalore/Ahmedabad later next year.

 

Banks however are likely to get more finegrained classification , the subject area being clearly defined and pushed by growth parameters from the potential of the unbanked and the unbranded to the potential of global competitiveness brought by globalising of the Indian Banking brands, no tthe outpost business we do to debilitate the banking brand from India today.

I for one would also give Duvvoori Rao a break and a C-Off for Chidu too instead of forcing anyone on a rate cut.

 

Monday Monday
Monday Monday (Photo credit: soonerpa)

 

 

Pre Closing Trading Strategies- October 18, 2012

The week has been good for those waiting for a clear trend to emerge as the road to 5850 looks swift and clear. It may easily target 6000 on the Nifty depending on the Rupee and the levels of the Sensex that can get the indices to a 6000 Nifty/20000 Sensex orbit before seriously considering a technical correction.

Interestingly the rise in EBITDA margins at Cement companies expected at Ambuja, Holcim and ACC has come in tandem with th jump in old textile scrips with Century and Raymond going up 4-6% in the session giving one quick shots to move into for Friday and for next week. The EBITDA was reported at 18.4% at ACC up 500 bps

Infra and Banks may not move together this time but older stock market favorites could turn up like a Shanghai surprise for investors and traders, with Raymond itself tipped for a 400 target ( Mitesh Thakkar, ET Now)

Cement scrips are a good pick as JP Associates finally gets a higher offer from Grasim (Aditya Birla) as well to 130 per tonne capacity for its 11 MTPA plants on Sale to reduce the group’s debt burden and synergise in construction services and Infrastructure/Power

Sun Pharma unfortunately could be a miss for Friday and Monday as the markets review the loss of its Lipidoc sales in the US as the original drug from JNJ is probably back in the mearket

ACC Net Profit of 2.42 B makes it a good pick but Axis and BOB are already up too much for a 30-5% move and I would prefer to go with PNB, SBI which at 821 and 227- are still underpriced and ICICIBANK and HDFCBANK. The isolation of CNXIT could infact augur well for Switching strategies later lengthening the move in the broader indices. A NSE 5850 target is obvious so F&O interest in Futures and Calls for the next two weeks are interesting but it is the latter half ogf the series and any carryforward positions are equally likely to bite overnight

IDFC could start the infraco bite on Monday or Tuesday for another 10% catch up to earlier stable levels from the current depressed prices including L&T and BHEL and not mid cap infra or DLF and construction biggies or IBREL.

 

 

Happy Thursdays! Infosys alone cannot change the trend

Tata Consultancy Services - Ferrari ad at Hyde...
Tata Consultancy Services – Ferrari ad at Hyderabad airport (Photo credit: teemus)

Bears had fun in the markets today poised to take the markets below 17000/5200 tomorrow or day after, but the results from TCS could change all that. The IIP was a nice positive surprise too and it seems not just consumption but some production and some growth in basic and intermediate goods was underwritten too. the Fiscal and Current deficit should also have crawled out of the hole of worry and banks set to take the lead in an Economy which they have nurtured. The growth in Credit for the week is lower only because the ebnd march ramp has to die out anf is still a globally leading indicator of the goods Asia can bring home with 14% growth and a M2 also close to 14%

However, that Infy results were cathartic for the markets cannot be denied, and I am aching to buy some good infra and banking stocks onthe pick up again, esp if I can be a keeper for 6 or more months, this not proving to be but still looking like the bottom we had in the second half of 2009

TCS reports a volume growth of 3% in USD terms and ofcourse double digits in Rupee terms even as the wage increasesaffect the EBITDA. Also MindTree may be back to a buy level at 632, so print the upgrades and lets get going . Of course consolidations, almost discouragingly last at least 4 more sessions and a quicker run up may only trade so llok for a weekend close towards 5200 or at least an intraday dip after we have celebrated TCS and Infy starts back above 2300 tomorrow open if TCS results do fine,

Late Morning Trading Strategies: July 12, 2012

IIP for May outperformed expectations at 2.4% up 24 times over last month, mfg up 2.5%, Electricity up 5.5% mining down just -0.9% Durables are up 9.3% again Cap goods are down as per global trends at -8%

Though a lower target from Infosys is INR 1671 and funds could be closing out large positions in the stock, the orst is done and the Rupee also recovered, choosing to react even t o corporate results for the Infy boardroom morning. Infosys CFO does a creditable job of defending lower EBITDA, most autobots would have started accumulating infy on the backbreaking fall. $7.35 B in USD revenues would be a good enough score for Infosys followers ho had priced in industry conditions.

The trouble is the home of the outsourcing industry, India has many temple going followers of the scripts either TCS or Infosys, who cannot understand technical things like clients deferring projects or even as the ET broadcast is blaring in its new Cannes retro campaign “Pyar kiya to Darna kiya”

COALINDIA is a great buy. I would suspect apart from individual buys on IndusInd and YESBANK, the whole BANKNIFTY Index will be a buy at 10650 to at least 10800.

MARUTI , BAJAJAUTO and STRIDE ARCOLABS (STAR) could survive, SBIN could be a great pick. 5250 should be a new bottom, esp if TCS and HDFC BANK follow on expected lines

Morning Bites of Substance: Dollar makes pre open woozy

 

logo
logo (Photo credit: Wikipedia)

 

The Dollar apparently ‘unfairly ‘ beat equities to the open, climbing to 57 despite weakness in the Dollar index, again designed to keep the falling euro in balance and rising against the Rupee

1. Apollo Hospitals are setting up 2000 pharmacy units in the next 3 years, though 5000-10000 will be critical mass EBITDA of the private label business is expected to grow by 12-15% and that of the overall branded business by 7-8% Pharmacies sruvived 2012 March with a 5.7% EBITDA and apparently older non performing stores will be shut down

English: Anil Ambani, Tina Ambani, Anil Dhirub...

2. Reliance Anil Ambani is buying into Shopper’s Stop spending INR 515 M on 1.76 M shares likely taking its stake to 5% from the March data shared in print

3. Jyothy is likely to relaunch Henkel Brands, Margo, Pril, Henkel and Fa this year and Mr White and Neem next year

4. media fave Sun Tv is investing another INR 5 B , 2.5 in movie acquisition and a similar amount in Capex

 

 

 

India Earnings Season: More Enterprise without profit (Nov 10)

Vodafone metro
Image via Wikipedia

Leading the news today is a cascade of TPO orders for Transfer pricing practitioners, as pricing becomes another bone of contention for Corporates struggling with slow orders and higher basic inputs in the quarter. Vodafone recd a draft order here thursday after it reported Sales of $3.3 bln from India operations. Vodafone had just declared its India operations profitable in March and is nowgaining from SMS termination charges and 66% increase in Data traffic / 25% increase in customer base this fiscal till September. Vodafone WW grew EBITDA but debt repayments landed it in a loss worldwide Indian EBITDA is $800mln (INR 42.55 bln) for the half year out of a global $15bln guidance on $65 bln sales runrate. india’s contribution to sales for the half year comes to nearly 10%. Costs would rise as Intra roaming on 3G are also looked askance by TRAI and 3G Licence loans come up for active repayment schedules

DLF

DLF reported sales of INR 23.8 bln or $470mln but failed to report growth in profit and sector inventories having risen others based in Mumbai instead of DLF Delhi / DLF Gurgaon may not even have that luxury of reporting any profits, still reporting healthier profits on sale of TDRS before prices went down The others are of course responding to the nation’s lawmakers and enforcers in a myriad web of encroachment on regulation

Mahindra Satyam

Reports a qoq growth in sales to INR 15.78 bln vs 14.4 bln in June and profits to an EBITDA (low) of 15.33% for INR 2.42 bln. PAT is up 5.7% over June to INR 2250 mln or $45mln

TCS did report good news for the sector with a new $2.2 bln Friends life contract for 5 mln + policies for 15 years  at London based Diligenta set up in 2005 after transfering business and staff from Pearl insurance.

JSW Energy / Voltas

JSW energy reported sales of INR 9.5 bln frm 11 bln lasty ear, Voltas reported sales up 37% to INR 11 bln or $220 mln but profits of 1.3 bln talking to a loss of 1.09 bln this quarter , a downtick changing hands at around INR2390 mln or $500 mln

GMR Infra

GMR Infra sales are up nearly 50% to INR 18.1 bln converting profits of INR 710 mln to losses of INR 650 mln, a downtick of $23.2 mln

Tata comm

The company reported loses of INR 1.65 bln against INR 2.1 bln last year in September on sales growth of less than 20% to INR 33 bln

The retail consumption level off – Airtel reports higher EBITDA

bharti-airtel-ltd-300x224
Global Airtel circa 2009

With Africa delivering a billion dollars in revenue, Airtel went to becoming a $4 bln quarter company with relative ease. the industry pressures however have started showing on the leader domestically, losing ARPUs to 192 per subscriber and minutes down 1.5% to 442 ( for the Indian Market, where revenues are $3 bln and over) The Profit of $350 mln continues to destroy corporate brand expectations for the company, where the management expects a market share downtick from cannibalisation of its share by the plethora of players whose bill plans have had to be competitively adopted by Airtel and Vodafone also.

Apart from the growth in Africa, the management’s predilection for confusing the corporate brand with its market presence may continue to be its downfall, as strategy budgets are honed to operationally upend the

bharti-airtel-ltd-300x224
Image by bhautikjoshi via Flickr

current equip,ment in its 17 new business zones in Africa EBITDA has grown from 31.5% to 33% and they are good for the long run. Airtel has 40 million subscribers in the Indian Continent and 17 million in 16 countries across Africa

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